Wage Garnishments: 4 Best Practices Employers Need to Know

Every employer should be equipped to handle wage garnishment should the need arise. Garnishment is a legal process to ensure debt is paid.  (The type of debt could be student loans, credit card debt, child support, or others.)  As a legal requirement, wage garnishment may trigger legal liability, steep fines, and damage to the employer brand.  In some cases, employers may be liable for 100 percent of an employee’s wage garnishment if they process it incorrectly.  While employees may not be happy to have their disposable earnings garnished before they reach a bank account, failure to comply with wage garnishment for child support may result in a revocation of a passport or driver’s license.  MP’s payroll experts share best practices every employer must utilize when handling wage garnishments. 

Wage Garnishment: 4 Best Practices 

1. Ensure wage garnishment information is confidential. 

Organizations must ensure employee files, which include information about wage garnishments, are kept in a secure, confidential location.  Only HR employees or those who handle payroll processing should have access to these files.  One best practice is to keep garnishment information separate from the general personnel file.  Employers should ensure wage garnishments never impact promotional disciplinary decisions.  Another option is to use software, such as MP’s payroll processing software and talent management software, to store and document employee data securely.  Managers and HR and payroll department employees must be trained and vigilant in never sharing wage garnishment information with others.  This practice should include coworkers, reports, or people outside the organization.  This information must be kept confidential verbally, not just regarding employee files.   

2. Consider employee morale. 

Compliance is key to handling wage garnishments, but so is the employee experience.  Employees may be distressed when a court order requires wage garnishment; their paychecks are significantly reduced to pay off credit card debt, etc.– especially if they make minimum wage and aren’t making a significant salary.  Sometimes, wage garnishment may discourage employees and de-motivate them to perform well.  Impacted employees may feel they’re no longer working for their own benefit, but for the people or organizations garnishing their wages.  Employers could ease this stress and frustration by offering access to financial counseling.  A financial counselor may be able to help employees plan and manage their debt more effectively.  Organizations should also show compassion to the impacted employees when discussing their wage garnishment.  (Note that all employees should be offered access to a financial counselor, not just the ones with garnishments.  Otherwise, this could create the appearance of discrimination.)  It’s vital for employers never to work around garnishments via “under the table” payments, 1099 classifications, or any other arrangements.  Doing so could create enormous liability for the business.  

3. Work with HR and payroll experts to ensure wage garnishment compliance. 

As mentioned above, compliance is key to handling wage garnishments.  There are a variety of types of wage garnishments, including:  

• Bankruptcy 
• Child support
• Student loans 
• Tax levies 
• Creditor garnishments 

These types of wage garnishments are subject to legal requirements that may change from state to state.  In some states, employees may be exempt from a wage garnishment if they don’t make above a certain amount.  If employers have remote employees, they may need to comply with wage garnishment requirements in multiple states.  Additionally, federal and state legislation surrounding these matters is constantly changing.  Working with HR and payroll experts, such as the ones at MP, will ensure an organization is handling wage garnishments in compliance and reducing legal risk and exposure.  Payroll and HR experts may also help an organization plan ahead and stay abreast of changing legislation.  Sometimes new legislative and regulatory changes require quick action from employers, including: 

• Specifications regarding electronic signatures and documentation 
• Limits on wage garnishments 
• New time frames 
• Forgiveness programs, such as recent ones for student loans 

Working with MP may help an organization prepare and comply with changes promptly– and without hectic confusion or challenges. MP’s proactive experts could advise an employer of imminent changes to laws and regulations, as well as steps for preparation.  

4. Streamline and automate garnishment by leveraging payroll software. 

Electronic wage garnishments may not always be in compliance.  Employers should consider using payroll software, such as MP’s.  With the right payroll software, wage garnishments may be easily and accurately calculated and automated.  MP’s payroll experts will help an organization determine when they are allowed to handle a wage garnishment electronically, what paperwork and documentation are required, and if these requirements ever change.  For example, federally mandated child support payments may be garnished electronically.