Business & Economy

Wednesday, 17 June 2009 10:39

Employers being scammed as employee debt soars – government asked to intervene

{pp}Many debt collection agencies and lawyers are relying on employer ignorance of garnishee orders by charging excessive fees. They are also delivering documents that look like court orders – but aren’t – to ensure money gets deducted off employee salaries to pay off debt.

And now two major companies assisting companies and consumers with debt are calling on government to urgently take measures to improve what they say is a worsening situation.

“We had a labourer who overpaid his debt by R36 000, he didn’t know nor did his company until we did an audit of their records,” Andre Snyman, CEO of Consumer Assist, South Africa’s largest debt counselling organisation said. “There is a significant need for staff in employer’s payroll departments to have a better knowledge of the Magistrates’ Court Act and ask more probing questions.” He said

Many major financial services organisations; retailers, security firms and others had instituted financial wellness programmes for employees – with BMW recording dramatic drops on staff absenteeism and a rise in productivity once they did. The situation is worsening as personal debt increases. StatsSA recorded that the number of civil summonses issued for debt for the first quarter of 2009 increased by 22,1% compared with the first quarter of 2008. There was also an increase of 40,9% between March 2008 and March 2009. They also noted that the total number of civil judgements recorded for debt for the first quarter of 2009 was 7,0% higher than the first quarter of 2008. There was also an increase of 33,8% between March 2008 and March 2009.

Anton Viljoen, CEO of Debt Control Management, South Africa’s largest company helping corporates manage garnishee orders – monies deducted from salaries on the basis of a court order - said, “working group sessions were held with the Regulator four months ago because government is considering new rules that will ensure that an employer must either prove he has the competency to manage garnishee orders or they must outsource it to debt management specialists to prevent the exploitation of consumers.” A garnishee order is placed on the salary or wages of consumers by courts to compel them to pay back debt. Viljoen estimates that at least 15% of South African employees have one or more garnishee orders on their wages or salaries. Viljoen said: “Most employers believe that the biggest risk of garnishee orders is that the lawyer can issue a warrant of execution for not deducting monies from his staff. But what most companies don’t realise is that if more money is deducted than stipulated on the garnishee order, which often happens, the employee can lay a claim against the employer.” He said that companies had become the unfortunate middlemen in the debt wars between consumers and creditors. “Employers should be compelled to make use of companies that specialise in administration garnishee orders or get systems in place.” He said that because most employers don’t have systems in place to calculate the fees and interest charges of garnishee orders, employers kept deducting until a lawyer told them not to, “and in many instances consumers are paying more than they should.”

Snyman said companies and employees coped better when financial wellness programmes were put in place. “Some companies rely on banks to assist them with this, but they are partisan. It is better to get independent organisations to do this that have no vested interest in issuing loans or taking action against the indebted.” Elsabe Engelbrecht who does psychological counselling for employees traumatised by debt stress and who works for BMW and Consumer Assist with their financial wellness programmes said “debt is taking a huge toll on the workplace with growing absenteeism, depressed and demoralised staff and bickering in the workplace. “Parents become less involved with their children as they focus their energies on trying to figure out how to get out of debt. They become demotivated and unproductive as their concentration and attention span wanes. Although companies are concerned about their budgets they need to understand that without an effective financial wellness programme staff productivity will continue to decline.”

Contact information:
Andre Snyman
Consumer Assist
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012 654 6018

Issued by:
Charlene Smith Communications Pty (Ltd)
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021 762 2656

Contact: Leila Beltramo
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Tel: 021 762 2656

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