Wage garnishment of any worker’s pay can be a sticky situation for any company. There are a number of reasons why one of your employees could have their wages garnished or deducted usually by court order:
- medical debt
- child support
- student loan defaults
- consumer debt
- tax levies
The process of wages deductions usually takes place as part of the payroll process. Unfortunately, wage garnishment is a fact of life for many employees and their companies and often there’s the challenge of who gets paid first if there are not enough wages for all the required garnishments. So who gets paid first? Taxes always come out first and it’s federal taxes that get priority over other taxes like local state tax. Credit cards and other consumer debt come last in the pecking order of deductions after other federal garnishments like student loans, and child support.
Not all states allow wage garnishments e.g. in Florida, if the person’s wages contribute to more than half of the support of a child then their wages are exempt.
While each state has its own garnishment rules, the process still has to be authorized by a court. Once a company receives a garnishment order, it must immediately start deducting the amount from the employee’s paycheck. If a company fails to remit the payments on time (or at all), it can be held liable and made to pay what the employee owes. So making sure you have everything handled is essential and it’s time-consuming so for smaller businesses the process is beyond a single payroll manager’s capabilities.
Things to Consider
When it comes to wage garnishment, there are several things to consider, including:
- What part of your employee’s wages can be garnished?
- How much should be garnished from their wages?
- How long do you have to garnish their wages?
- What are your state laws regarding wage garnishment?
- Can you terminate an employee because of wage garnishment?
- What do you do if you receive a wage garnishment order for a former employee?
- How often should you garnish your employee’s wages?
That’s a lot of things to consider, which can seem daunting to even the most experienced HR or payroll department.
If you have a small HR or payroll department, have multiple wage garnishment orders, or want to make sure everything is processed correctly, you should consider outsourcing your wage garnishment. If you already outsource your payroll, your payroll company should provide you with wage garnishment services.
Before you outsource your wage garnishment, make sure you do your research and interview potential payroll companies. You want to make sure the company has a great deal of experience with wage garnishment. Ask them for examples of the types of wage garnishments they’ve handled. Get them to walk you through the process of handling the different kinds of wage garnishment you could see at your company.
The company needs to have a clear and deep understanding of your state’s wage garnishment laws and rules. The company doesn’t necessarily need to be located in your state, but they need to understand your state’s laws and have experience following them to the letter. The last thing you want is to find out the company to which you outsource has been handling your wage garnishment using California rules when your company is based in New York.
Use the list of questions above as a guide when you interview and research potential companies to outsource your wage garnishing too. If you can’t find the answers yourself on their website or get the answers you need from conversations with the company, you can probably cross them off your list and find a better option.