- Wage garnishment, the court-ordered extraction of money from workers' earnings to satisfy a debt, affects one in 14 Americans, according to a study from ADP Research Institute. Of those affected, 71% are men, typically between the ages of 35 to 55, who work for large manufacturers in the Midwest or the South. The group's average annual wage was $44,000.
- The study identified four basic categories of wage garnishments affecting U.S. workers: child support, the most common; "other," which includes consumer loans and student debt; tax levies; and bankruptcy. Child support is the major wage garnishment for men, and about 12% of workers face more than one type of wage garnishment. Wage garnishment rates per person were found to be higher in the Midwest and in goods-producing industries.
- ADP says that wage garnishment can be difficult for workers and employers, who must abide by regulations covering garnishment, comply with orders and administer the process. The pay data came from 12 million American workers.
Besides handling the administrative side of carrying out garnishment orders, employers must deal with the fallout of wage garnishment, which can stress out workers and lower productivity. One in three employees reported being distracted at work because of financial problems, according to the Center for Financial Services Innovation.
Wage garnishment can be especially weighty on workers with annual earnings at or below $44,000 and those facing multiple orders. The absenteeism and health problems associated with stress can raise costs for employers.
Companies that don't comply with wage garnishment orders can face penalties and fines. In fact, some states hold employers liable for the full amount of a worker's debt in the event of non-compliance with court-ordered withholding.
There's no centralized system employers can tap into for help with handling wage garnishments. States have their own policies and procedures, which can be complicated for employees with orders from different states and employers operating in multiple jurisdictions. However, employers can consult with wage garnishment experts and advisors.They also can automate as much employee- and wage-related data as possible to be able to respond quickly to orders.
The Uniform Law Commission passed the Uniform Wage Garnishment Act in 2016, which has protective provisions for workers and provides some uniformity in garnishment procedures for states to follow. Employers should become familiar with this law and individual states' wage garnishment laws, learn the various types of garnishments and adopt the technologies that can speed up the compliance process.
Debt from student loans moved up from fourth place in wage garnishment categories to second place, a trend employers with young college graduates or who plan to hire will want to watch. This change might create the need to offer student-debt reducing benefits.