Wage garnishments can be a big deal for employers and their employees. According to ADP RI, approximately 7% of the workforce is affected by wage garnishments.
However, handling this process can be complex and costly for business owners. This is because the requirements of wage garnishments can vary by state, jurisdiction, and court.
Set the Stage
Setting the stage for effective communication with employees can be crucial in handling wage garnishments. It ensures that all parties understand the process and that everyone agrees on how the wages will be taken and who should receive them when sent.
A wage garnishment is an order instructing your employer to deduct a certain amount from your paycheck and send it to a creditor or other person you owe money to until the debt is paid in full or a new payment arrangement is reached. It’s typically used to collect alimony, child support, unpaid taxes, or other consumer debts.
Garnishments are based on an employee’s “disposable earnings,” which is the amount after legally required deductions such as federal, state, and local taxes, Social Security, Medicare, and withholdings for retirement systems required by law. It doesn’t include deductions not required by law, such as union dues and health and life insurance premiums.
The garnishment amount varies depending on the type of debt and can range from 15 percent of disposable earnings for student loans to 65 percent for child support.
When an order is received, employers must comply and start withholding and remitting payments within the allotted timeframe. Often, this can be a complex and time-consuming process for business owners. However, several things can be done to make it more efficient for both parties and minimize the risk of mistakes.
Be Honest
Wage garnishments can be a stressful situation for employees and their families. But employers can take steps to minimize the impact of wage garnishments, like finding a simpler way to manage wage garnishments on employees and the business.
When an employee receives a wage garnishment court order, the first step is to be honest, and up-front about the situation. You can do this in a letter to the employee or by contacting the creditor and letting them know about the issue.
In general, a creditor can use wage garnishment to collect money on a debt that is in default. It can come from child support, unpaid student loans, and consumer debts.
The amount of money an employee can be garnished for varies by state and jurisdiction. It can range from 15 percent of an employee’s disposable earnings for a student loan to as much as 65 percent of their disposable earnings for child support.
But you have legal rights to stop a garnishment. For example, you can make payment arrangements with the creditor, the courts, or the IRS.
It can also help to take a proactive approach to your financial situation by managing your balances and spending in one place. This will give you a clear view of getting out of debt.
Be Supportive
Wage garnishment is an action that requires employers to withhold a percentage of an employee’s wages and direct them to a creditor or government agency for the payment of a debt. Garnishments are often issued for child support, unpaid federal student loans, and other unsecured creditors.
If an employee receives a court order for wage garnishment, it is essential to communicate with them as soon as possible. This can help avoid misunderstandings and protect employers from legal liability and lawsuits.
An effective communication strategy should include the employee’s name, the type of garnishment, and a clear explanation of how it will work. It’s also a good idea to notify human resources or payroll departments so that they can set up the garnishment and remit funds accordingly.
The amount that can be garnished is limited by Title III of the Consumer Credit Protection Act (CCPA). This limit is based on an employee’s “disposable earnings,” which is the amount left over after legally required deductions such as federal, state, and local taxes; Social Security, Medicare, and state unemployment insurance tax withholdings; employee retirement contributions; and tips.
Educating yourself on wage garnishment laws and how to address the issue with your employees can make all the difference. A proactive approach can result in a lower administrative burden and reduced stress for your employees while helping you to minimize your risks of fines and penalties from noncompliance.
Be Prepared
Effective communication strategies can help you address wage garnishments with employees. If a creditor has a judgment against you, they can request that your employer deduct a portion of your disposable income and send it directly to the creditor until the debt is paid off.
Most wage garnishments come from a legal order from the court or government agency. It could be related to unpaid taxes, overdue child support, or outstanding medical bills.
Usually, a garnishment comes with a form that you must complete and mail back to the court within seven days. Failure to do so can lead to noncompliance penalties and possible litigation against you and your company.
In many states, there are limits on how much can be garnished in any one pay period or workweek. You should check this information with your state’s laws and regulations.
It’s also important to understand that, depending on the type of garnishment, an employer can be liable for administrative fees. These fees are set by state law and vary by type of garnishment.
Employers can also challenge a wage garnishment in court if they think the order is inaccurate or in error or if they’ll experience financial hardship. However, you should consult an attorney before challenging a wage garnishment to ensure the rules are clear and your legal rights have been protected.
