Wage Garnishments and Payroll Services
Wage Garnishments Create Problem for Payroll Services
Wage Garnishments Create Problem for Payroll Services – It turns out that seizing an employee’s pay to execute a wage garnishment can be a very complicated task. Unfortunately, the government sets the amount of the garnishment but places the burden of collecting the garnished amount with the employer. Ultimately, it is the company’s payroll services department or an outside payroll services provider who accomplishes the task of collecting money from the employees’ wages. A recent study by the ADP Research Institute showed that over nine million United States workers are currently under a wage garnishment order. Of this number, approximately 40 % were initiated to collect back child support payments with another 20% instituted to resolve a tax debt. Any way you look at it, this number of wage garnishments represents a lot of work for a large number of payroll services providers.
Collecting wage garnishments from employee paychecks is not always easy. This is primarily due to the fact that disposable earnings often vary from pay period to pay period, causing the exact dollar amounts of garnishments to fluctuate. Since wage garnishments are mandated to be a set percentage of disposable income, it is important that they be calculated accurately. To over calculate means that money is being taken from an employee illegally, while to under calculate means that the full amount of the child support order, tax levy, writ of execution or other wage garnishment mandate is not being fulfilled. Either of these inaccuracies represents a potential problem for payroll services as well as the company itself.
To help avoid processing an incorrect wage garnishment amount, some payroll services providers recommend running a wage garnishment audit before every payroll run. This involves doing an initial run, flagging employees who have any type of involuntary deduction and then checking those deduction amounts against wage garnishment mandates. A wage garnishment generally cannot exceed 25% of an employee’s disposable income, although larger percentages are sometimes allowed for garnishments related to child support or a tax debt. While a wage garnishment audit is an extra step in the payroll process, it may well save the save the company time and money in the long run by protecting them from the potential lawsuits the can result from garnishing the wrong amount.
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