Wage garnishment laws require that businesses withhold a portion of an employee's paycheck pursuant to a court order to settle debts including federal and state tax levies, child support payments and student and credit card debt. According to the ADP Research Institute®, The U.S. Wage Garnishment Landscape Through the Lens of the Employer, one in 14 employees has a garnishment of wages, and 12 percent of these have more than one type. The goods-producing sector has the highest wage garnishment rate, in which the transportation and utilities industry has the highest overall garnishment rate.
According to the Report, manufacturing (third behind mining, quarrying and oil and gas extraction) has a 9.8 percent wage garnishment rate (excluding businesses that have no wage garnishments). In addition, just under half of manufacturing companies have at least one employee who has a wage garnishment. Much of this may be due to the compensation provided in this industry. Furthermore, over 60 percent of employees who experience a garnishment of wages makes between $20,000 to $60,000 per year. According to the National Association of Manufacturers, the average wage in manufacturing is $26.00 per hour, which equates to $54,080, assuming a 40-hour work week and two weeks of paid vacation.
Reasons for the High Rate in Manufacturing
One of the reasons for the high rate of wage garnishment in the manufacturing industry and in other goods-sector industries may be that these industries have a higher concentration of blue collar workers. Other industries have a higher concentration of professional or white collar workers. Not being aware of options and not exploring those options may contribute to a higher incident of poor financial management, and that may be a driver here. In addition, according to the ADP's webinar presentation, Busted! Top 5 Wage Garnishment Myths, the higher proportion of men in the labor force in the manufacturing sector contributes to the higher wage garnishment rates. This is because the highest percentage of wage garnishments are due to court-mandated child support, for which men are overwhelmingly responsible.
The Financial Impact
Although the percentage of manufacturing jobs has shrunk over the last 25 years due to global shifts in trade and significant productivity increases, the export of goods manufactured in the U.S. has quadrupled to $1.4 trillion, according to the National Association of Manufacturers (NAM). In addition, manufacturing has an outsized impact on the U.S. economy. According to Forbes,"manufacturing generates $1.40 in economic activity for every dollar put in."
On a financial level, the high level of wage garnishments in the manufacturing industry has an impact. According to NAM, manufacturers shoulder a disproportionate amount of the cost of compliance with federal regulations overall. Companies as a whole spend $9,991 per employee to comply, while manufacturers spend almost double this amount or $19,564. Although the cost of compliance with environmental regulations represent 90 percent of the differential, the high garnishment level takes a toll as well. These employers may not be aware that they can recoup a small amount of their costs in handling wage garnishments by collecting an administrative fee. Most states allow for the collection of such fees from either the employee or the garnishor.
Due to the relatively high volume of wage garnishments that manufactures receive relative to other employers, manufacturers should put specific processes in place to help ensure that they are being compliant with wage garnishment laws. According to the "5 Wage Garnishment Myths" report, it is important to monitor legislative changes. If there is no internal capacity or the ability to utilize internal resources more efficiently, hiring an external consultant or outsourcing to a vendor that monitors and updates internal processes is a good option. Paying via electronic fund transfer (EFT) can help reduce costs by streamlining processes and increasing efficiency. Manufacturers that provide education and training both to the employees who process wage garnishments and those who are subjected to wage garnishment can mitigate some of the negative effects and help ensure compliance, respectively. Finally, instead of hiring attorneys to handle processing, manufacturing firms can further systemize procedures, reduce handling and minimize mistakes by implementing a wage garnishment service. Additionally, manufacturing firms can systemize procedures, reduce their tasks and minimize their mistakes with the help of a wage garnishment processing service.
The rate of wage garnishments in the manufacturing industry highlights the need for comprehensive and automated workforce management solutions. Such options can help ensure compliance with the applicable state and federal laws governing wage garnishments, mitigate the financial impact and reduce employee stress on both sides of a garnishment.
For further insights on wage garnishment, register for the webinar Workplace Compliance Spotlight: Strategies for Wage Garnishment Compliance
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