Increasing Garnishments for Credit Card Debt Add to Payroll Administrative Drain
Guest blog post by Kristen Wylie, Product Marketing Manager, Kronos, Inc.
One in 10 working Americans between the ages of 35 and 44 are getting their wages garnished. This stat comes from a national study on wage garnishment published by NPR and ProPublica earlier this week. These garnishments include the expected child support payments, tax levies, bankruptcies and liens. But increasingly, workers are seeing their pay docked due to credit card debt, medical bills or student loans.
In fact, according to ADP research that contributed to the NPR study, about four million workers — about 3 percent of all employees — had wages taken for a consumer debt in 2013. NPR and ProPublica revealed that one retail giant with 250,000 employees nationwide doubled the number of employees who had their pay seized for consumer debt in the past seven years (about 5,000 of the retailer’s employees currently have ongoing garnishments for consumer debt, and about 2,500 employees for student loan debt).
This increase in employee garnishments is a growing drain for already burdened payroll administrators, particularly in industries with the highest percentage of garnished employees. In manufacturing, nearly 50 percent of companies have garnished employees; in transportation and utilities, it’s more than 40 percent.
Different garnishment rules and processes create a legal maze that can be difficult to navigate. Consider the disparate sources that need to be coordinated for garnishment disbursement: courts, disbursement centers, spouses, lawyers, custodial parents, etc. And each may require different forms and terms.
Managing garnishment compliance is further complicated by widely varying state laws. For example, Texas, Pennsylvania, North Carolina and South Carolina largely prohibit wage garnishment stemming from consumer debt, yet more than half of U.S. states allow creditors to take 25 percent of after-tax wages.
According to Amy Bryant, a payroll consultant and author quoted in the NPR article, it’s easy for employers to make garnishment mistakes which may lead to the organization becoming liable for a portion or even the entirety of the debt in some states.
Employers need to be confident that all payments are being made accurately and on time to the multitude of receiving parties in each state. Whether you process garnishments in-house or outsource the task, select a technology partner that can help you streamline the time-consuming process with confidence. With the right solution in place, you’ll be able to minimize compliance risk and penalties, reduce operating expenses, and increase payroll efficiencies.