There is a lot that goes into successfully managing payroll. Making sure everyone is receiving the correct pay and gets their check on time is part of this responsibility, but at some point in time, employers may have to deal with wage garnishments. This particular subject is one employers may not know much about, but with there being a good chance that one of their employees will have to have their wages garnished in future, all employers should know more about the process and what all it entails.
Here are a few things employers should know about wage garnishment.
What is Wage Garnishment?
Wage garnishment is when a portion of a personal pay is withheld by their employer to cover the cost of a debt owed by that employee. This is typically the result when a person owes money for alimony, child support, loans and more. It is the employer's legal obligation to withhold these funds and send them to the designated party. If they fail to withhold and send these payments from every paycheck, they will be penalized.
What wages can be garnished and how much can be deducted?
As laid out by the Consumer Credit Protection Act, how much a person will pay is often based on their state and disposable earnings or gross earnings. The percentage varies, but in many cases it is at least 15 percent, but no more than 65 percent depending on the type of debt.
Can an employer terminate an employee who is having their wages garnished?
Employers who employ someone whose wages are being garnished cannot terminate this person if it is for a solitary debt. However there are not laws that clearly state they cannot terminate an employee for multiple garnishments. Because there are fees associated with the garnishment, if there are more than one, an employer may fire their employer or require that the pay the fee to offset the cost.
What should employers do?
When an employee is to have their wages garnished, a notice will be sent to their employer. Once an employer has been notified that a wage garnishment has been ordered for a certain employee, they must inform the employee, HR and payroll of this court order, ensuring that it is outlined how much will be taken out of each paycheck and for how long. After all parties have been informed, garnishment will start and the employer will remit the payments to the designated party until the debt is paid and the employer is notified that the wage garnishment can end.
It is not fun for people to have their wages garnished, but also is not something business owners look forward to having to do either. There is already a lot of stress than can come with properly managing payroll, and having to garnish an employee's wages can add to the stress. However, it is something employees must do if it is required of them and if they want to avoid being fined or penalized in another way for not doing so.