Photo by Ben White
Avoid financial liability or penalties.
Handling wage garnishments of your employees’ paychecks – including communication – is a very sensitive issue.
Money issues from involuntary wage garnishments are very embarrassing to employees. Such situations pose a threat to your employee relationships and morale. Meantime, you must process wage garnishments with lawful diligence.
Initial steps
1. Review the garnishment order right away. Confirm the employee’s identity, the debt details including the exact withholding amount and where to remit the money.
2. Respond with the required response with the court, agency or creditor within the legal deadline. Typically, it’s seven to 30 days.
3. Privately explain the order to the employee right away. Emphasize that you’re legally required to comply. The employee is likely to be emotional. Don’t discuss or debate the legality of the garnishment.
Calculate and determine the financials
You have to determine the employee’s disposable earnings. Calculate the gross pay minus the legally required deductions. They include federal, state, and local taxes, Social Security, and Medicare.
Know the federal caps on wage garnishments:
Consumer debts are capped at the lesser of 25 percent of disposable earnings, or the amount by which weekly disposable earnings exceed 30 times the federal minimum wage.
Child support and alimony can range from 50 percent to 65 percent of disposable earnings. That will depend on support status and what is owed.
Student loans and federal debts are capped at 15 percent of the disposable income.
In checking state laws, adhere to which federal or state law provides a lower withholding limit or greater protection for the employee.
Priority rules for multiple court garnishments
If an employee has multiple garnishment orders, here’s your withholding priority:
1. Child support and alimony
2. Federal taxes and IRS levies
3. State or local tax levies
4. Student loans, if they’re federal student loans
5. Consumer creditors on a first-come, first-served basis
Continuous best practices
Unless an employee has more than one garnishment, federal law strictly prohibits terminating the employee.
Track the balances and remit the money right away to the designated agency by the required date. Continue the process until you receive a stop order. Don’t rely on the employee’s verbal announcement.
If the employee leaves, notify the garnishing court or agency immediately.
Conclusion
Do your best to show respect to your employee. Remember the Golden Rule. Be empathetic and protect confidentiality. Hopefully, it will alleviate the employee’s angst and embarrassment.
Let the person know he or she will stay employed. In some states it’s lawful for a company to get reimbursement from such workers for the extra time expended to process wage garnishments. But the employee should be notified.
Personally, in most situations, I wouldn’t recommend seeking reimbursement from an employee. It would only exacerbate the situation.
From the Coach’s Corner, here are additional management tips:
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Hiring for a Small Operation? Conduct Behavioral Interviews — In this economic environment, whether you run a small operation in a big company or you own a small business, you’re wearing many hats. So you need employees who can successfully wear multiple hats, too.
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“Fairness is such a valuable thing, that no money can buy it.”
-Alain-Rene Lesage
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