Wage Garnishments: A Sensitive Legal Requirement
Estimated reading time: 4 minutes
Early in my career, I worked in the payroll office of a large hospital. I was young and naive when I was first exposed to wage garnishments.
I was exposed to wage garnishments at a young age and was required to submit paperwork to have money withheld from an employee’s paycheck when the organization received notice of a garnishment demand.
This was difficult as my heart ached for these employees. Many were young and didn’t make a lot of money.
But what was more difficult was when the angry employee came storming into our office on payday.
Fortunately, I was at the bottom of the rung, so a higher manager had to deal with the upset worker.
That experience was a life lesson for me.
One is to pay my bills on time, but I also learned that sometimes, these garnishments are the result of situations that honestly are out of a person’s control.
All that said, employers do have a legal obligation to comply with laws that mandate garnishment practices.
We are fortunate to be in a stable economy, but employers must deal with employee wage garnishments.
What is a wage garnishment?
According to the US Department of Labor:
“A wage garnishment is any legal or equitable procedure through which some portion of a person’s earnings is required to be withheld by an employer for the payment of a debt. Most garnishments are made by court order. Other types of legal or equitable procedures for garnishment include IRS or state tax collection agency levies for unpaid taxes and federal agency administrative garnishments for non-tax debts owed the federal government.”
This unfortunate situation causes embarrassment for the employee and additional paperwork for the employer.
I think it is safe to say that no employee is excited about getting their wages garnished.
What Employers Should Know About Wage Garnishment Requirements:
- Title III of the Consumer Credit Protection Act protects anyone who receives earnings of salaries, wages, bonuses, commissions, or any other income.
- Title III protects employees from being terminated for the garnishment of one debt and limits how much of an employee’s earnings can be garnished.
- The Act does not prohibit employee discharge because of garnishments of two or more debts.
- Garnishments are deducted from “disposable earnings”. Disposable earnings are earnings after all federal, state, local, and social security taxes are deducted.
- There is a maximum amount that can be garnished in a workweek. This amount is either 25% of the disposable earnings or 30 times the minimum wage ($7.25), whichever is less.
- The Act allows up to 50% of disposable earnings to be garnished for child support or alimony or 60% if the worker is not supporting another spouse or child.
- Garnishments up to 15% of disposable earnings can be made for debts owed to the government.
- Garnishments up to 10% of disposable earnings can be made for defaulted student loans.
3 Ways Employers Can Help Employees With Wage Garnishment
1. Maintain Strict Confidentiality
Let’s be real. There is not much that is more embarrassing than knowing others are aware of a wage garnishment.
Information about an employee’s garnishment should be restricted to a “need-to-know” basis.
In other words, only those employees who need to know about the garnishment should have access to the information.
This may include the person in accounting who processes the garnishment or anyone who communicates with the court or attorneys administering the garnishment.
Other employees, including the employee’s supervisor, should not have access to this information unless there is a legitimate need to know.
2. Offer Financial Counseling
Garnishments can result from past-due child support and changes in financial income, but they are often the result of poor money management.
Sometimes, an employee finds themselves in a difficult situation and simply needs help with a personal budget.
Look for free budgeting tools you can offer the employee to help them get started. Sometimes, they need a financial counselor to help them devise a plan.
Either way, try to be respectful of how you provide this help and allow the employee to save face by confidentially protecting their privacy.
Not every employee will be open to help but for those that are, it can result in a positive long-term impact.
3. Maintain Communication
Wage garnishment is typically not a one-time event. It can take months or even years for a debt to be paid.
Try to maintain communication with the employee as the debt goes down.
Keep the employee in the loop on the process of payments, especially if multiple creditors are being paid.
These sensitive yet informative conversations can be reassuring to the employee that there will be an end.
We all go to work and are rewarded on payday. Employees who see their take-home pay reduced for garnishments can experience frustration and embarrassment and can become discouraged.
Take the time to help your employees by protecting their privacy, helping them with financial issues, and supporting them through the process.
These simple acts of kindness can go a long way toward helping an employee who may have fallen on hard times.
For more information on wage garnishments, visit dol.gov or contact the US Department of Labor at 1-866-487-9243.
