Wage Garnishment: The Heavy Burden of Collecting Debts for Others

An HR leader talks with a finance team about employee wage garnishments.

Withholding an employee's wages can be a burdensome task, requiring a lot of administrative work.

When an employee fails to pay a debt, such as child support or a student loan, their employer often finds themselves in the uncomfortable position as a middleman between the employee and their creditor. Depending on the amount the employee owes, wage garnishment — the legal process that compels an employer to withhold wages for a debt or enforce a support obligation for the benefit of a third party — can last for months, and in the case of large debts, for years.

Garnished Wages: The Numbers

According to the 2017 ADP Research Institute® report, The U.S. Wage Garnishment Landscape: Through the Lens of the Employer, "7 percent of the sample had their wages garnished." The garnishment of child support accounted for 3.4 percent, while 2.9 percent related to "other" general garnishments involving mainly student debt and consumer loans. Tax levies and bankruptcy accounted for 1.5 percent and 0.4 percent, respectively. Here are some additional findings from ADP:

  • Child support is the primary reason for wage garnishments in the United States. According to ADP, employee garnishment actions most often relate to unpaid child support.
  • An estimated 12 percent of those with a garnishment have more than one. The inability to pay debts can translate to multiple garnishment actions. The number of garnishments averages "1.4 per employee."
  • Employees between the ages of 35 and 54, aka Gen Xers, incurred the most garnishments. Workers aged 35 to 44 received the most garnishment actions, accounting for 10.2 percent of all collection activity.
  • Men carry more garnishments, primarily involving child support. Seventy-one percent of garnishment actions involve men, with 92 percent relating to unpaid child support.
  • More than 60 percent of employees subject to garnishment earn an income of between $20,000 and $60,000. The average number of garnishments and garnishment rate for all types of garnishment is highest in this income range as well.
  • Smaller firms garnish wages at a higher rate than large firms. Thirteen percent of small firms garnished wages in comparison to 8.7 percent of large firms. Mid-sized firms (50 to 999 employees) garnish as at a similar rate to large firms.
  • Workers subject to garnishment earn a lot less than those without. Workers without a garnishment earn on average 25 percent, or approximately $10,000 more per year, than those who carry a garnishment.

Courts Come Down Hard on Organizations That Fail to Comply with a Wage Garnishment Order

So what happens if an organization fails to comply with a garnishment order? Withholding an employee's wages can be a burdensome task, requiring a lot of administrative work, and U.S. courts have a number of tools at their disposal to punish organizations that fail to comply. While state laws vary, the failure to withhold or remit wages can result in a contempt of court order, fines, penalties and attorney's fees and costs. In certain jurisdictions, employers that do not withhold a worker's wages can find themselves liable for the entire amount that their employee owes.

Although efforts by U.S. workers to fight garnishment actions arising from unpaid student loans from a bankrupt, for-profit college have been in the news, it's clear employers will continue to receive a steady stream of wage garnishment orders, so finance leaders should prepare their organization accordingly with up-to-date systems and streamline processes.

For more information on wage garnishments, register for the webinar Workplace Compliance Spotlight: Strategies for Wage Garnishment Compliance.