When an Employee’s Wages Are Garnished, Their Company Also Pays a Price

Wage garnishment – the legal seizure of employee earnings to settle child care payments, tax levies, and other forms of debt – impacts many U. S. employees and their employers. While garnishment has a defined impact on each garnished employee, their employers – who by law must manage the costly administration of garnishment compliance – also bear a tangible burden. Employers that fail to comply with garnishment orders can face costly penalties. In some jurisdictions, this may even include being held liable for the entire amount of an employee’s judgment.

In the newly released whitepaper, The U.S. Wage Garnishment Landscape: Through the Lens of the Employer, the ADP Research Institute® – which identifies and analyzes trends in the labor market to help unlock business potential and enable informed decisions and actions – visited the wage garnishment topic, utilizing 2016 aggregated, anonymous pay data of millions of U.S. workers.

Findings from the new study, when compared to the Institute’s “Garnishment: The Untold Story” from 2014 first-of-its-kind wage garnishment study, help to bring important trend lines to light.

What is the current state of U.S. wage garnishments?

The study revealed that about 7 percent of the U.S. workforce had their wages garnished, not all that different from the 2014 research. According to the study, for example, childcare garnishment by far remains the chief reason for most U.S. wage garnishments. Certain compensation groups tend to have higher garnishment rates and number of garnishments. In addition, the garnishment rate and number of garnishments carried by men continues to significantly exceed those of women in the workforce. However, on average, men and women are having their wages garnished for different kinds of debt.

How are employee garnishments affecting employers?

In addition, the study provides employers with significant insights into how garnishment may affect their workforce and their organization. In fact, data revealed that the volume of a company’s wage garnishments to some extent depends on the company’s size, its industry, and the geographic locations of its workers. The research presents a compelling picture for employers across the size spectrum, from large-to-small organizations.

Interestingly, if you only considered companies with garnishments in the study’s data calculations, the applicable garnishment rates for these firms – regardless of size, industry and region – are generally higher

Is there any good news?

Employees and employers obviously do benefit when garnishments are few or nonexistent – which, happily, is the case for many businesses. As an example, employees with no garnishments, on an average, are clearly earning thousands of dollars more each year than their colleagues who are carrying a garnishment. Employers, in turn, are benefiting from a lighter administrative burden and having fewer workers who are stressed, humiliated, and distracted because they are taking home a garnished paycheck.

Go deeper and read the full whitepaper – The U.S. Wage Garnishment Landscape: Through the Lens of the Employer – for more information on this topic, including more granular details on where garnishments are most prevalent and which firms and industries tend to see higher garnishments and rates of garnishment.

About this report: This new study presents an expanded view of U.S. wage garnishment activities through the lens of the employer, such as the average number of garnishments carried by employees. The study is also augmented with a new analysis of data to provide employers with greater insights into how garnishment may affect their workforce and organizations.