Wage Garnishment and Age: Challenges in the Middle
This article was updated on Aug. 23, 2018.
There's a definitive correlation between wage garnishment and age, according to a report from the ADP Research Institute® Garnishment: The Untold Story, which used a data set of some 13 million employees. The results point to a bell-shaped curve, showing more garnishment in the middle of the age spectrum. Among the youngest group of employees (16 to 24 years old) and the oldest group (65-plus), the garnishment rates (defined as the proportion of employees having wages garnished compared with the total employee population) were just 2.1 percent and 2.3 percent, respectively.
In the middle, among employees between the ages of 35 and 44, the garnishment rate soared to 10.5 percent, about five times higher than rates at both ends of the age spectrum. The garnishment rate was so high among the 35- to 44-year-old group that the overall garnishment rate for all employees was a hefty 7.2 percent, despite relatively low rates at both ends of the employee age spectrum.
Here's a look at the reasons behind that eye-catching 10.5 percent garnishment rate among 35- to 44-year-old employees, and why this is something employers should be paying attention to.
Explaining the "Bulge" in the Middle
Garnishments are efforts by creditors to collect debts, and they place employers in the middle between creditors who have a legal right to collect and employee/debtors who work for, and receive compensation from, the organization. The debts in question may be related to taxes, student loans, bankruptcies or child support obligations. Garnishment: The Untold Story explains that the 35- to 44-year-old age group is especially affected by this issue because they are "typically the age of peak debt load, child rearing, and divorce."
When you add high divorce rates into the mix — the report cites a divorce rate of 50 percent — the result is often employee child support obligations that can lead to wage garnishments. Whereas younger employees are more likely to be single and older employees may have kids who are past child support age, employees in the 35 to 44 age category are more likely to be raising dependent children. Indeed, much more than half of all garnishments in this age group are due to child support obligations, the highest rate of child support garnishments among any of the six age groups covered by the report. Garnishments related to taxes are also disproportionately higher among the 35 to 44 age group.
Employees subject to garnishment confront financial stress that can easily transform into emotional stress, which can impact workplace productivity, trigger increased rates of absenteeism and contaminate relationships with colleagues. Garnishment: The Untold Story explains some of these negative ripples:
"The impact of wage garnishment on employees extends beyond their paychecks and into every aspect of their lives. Employees often find it humiliating, because the courts have had to intervene and employers have become involved in their otherwise private struggles. Employees in this position may feel they no longer work for themselves and their futures, but for the institutions to which they are indebted. Stress and anxiety are natural outcomes."
The Employer's Role
Although the employer is neither the cause of the employee/debtor's legal obligation, nor has any discretion in complying with a legally binding garnishment order, the employee's resentment could extend to the organization potentially driving disengagement and negatively impacting the whole team. The submerged nature of this resentment makes it no less toxic.
For employers, garnishments can be a risk-laden compliance issue. Failure to manage garnishments appropriately can lead to hefty penalties and fines. The organization is often caught in the middle, struggling to balance the concerns of employees (its most valuable resources) with often-complex legal requirements.
The ADP report advises employers to take a measured and comprehensive approach to handling wage garnishments among their employees to "protect against unwarranted liability, while serving employees compassionately and cost-effectively."