How to Relieve the Pressure of Wage Garnishment
Wage garnishment is now a fact of modern American life for many people, and like every other fact of American life, its implications can ripple through society and the economy with equal power. The home and workplace stress of wage garnishment, and of debt in general, can be devastating to individuals, but the pressure also affects the businesses that pay the employees whose wages are being garnished. According to the ADP Research Institute® (ADP RI) report, The U.S. Wage Garnishment Landscape: Through the Lens of the Employer, this problem is severe.
Here are common issues that HR and management face when it comes to wage garnishments and ways to cope with them.
Even Well-Paid Workers Get Garnished
Despite years' worth of evidence to the contrary, many in the business community still believe that only organizations with workforces experiencing significant wage garnishment are those that pay at or near minimum wage. This is not true. The reality is that debt has begun to dramatically affect almost every level of the American workforce. The effect of this trickles up to employers of all sizes. As ADP RI notes, an employer can become liable to the creditor for the full amount of an employee's judgment if it does not comply with the wage garnishment order.
That's a big problem when roughly 7 percent of the overall workforce is having its wages garnished, and when those workers are spread between every age, region and industry cohort, according to ADP RI. That's because garnishment isn't just about unpaid credit card debt but also less avoidable obligations like student loans and — most common of all — child support obligations. Those are concerns that can affect workers virtually anywhere on the income spectrum. "Almost all larger-size companies (>5000 employees) have at least one employee with a garnishment," notes ADP RI.
Workplace Stress Affects Business Too
HR leaders should be acutely aware of the stress that can be caused to workers whose wages are being garnished, but management and finance should be just as aware of the stress these same wage garnishments puts upon the business itself. According to ADP RI, "Not only does garnishment have a defined impact on each garnished employee, but also on their employers, who bear the costly administrative burden of garnishment compliance."
Beyond those direct costs, wage garnishment can affect worker productivity by splitting their focus between work and the often growing problems at home. There is a reliable association between pay-related stress and productivity at work, with more than 37 percent of workers surveyed saying "that at work each week, they spend three hours or more thinking about or dealing with issues related to their personal finances," according to PricewaterhouseCoopers. Collectively, all that worry in the workplace can affect the bottom line, and since it arises from a systemic problem, it's not something that can be fixed simply by replacing the most affected employees.
Stress Is a Matter of Perspective
With both federal and state laws requiring businesses to garnish wages upon receipt of wage garnishments orders, there's not much managers can do to avoid the administrative costs of garnishment, but HR departments can help offset other costs. Workplace stress due to wage garnishment often arises not from an objective lack of funds after wages are garnished, but a feeling of helplessness. HR can help by presenting wage garnishment as a device that can remove or reduce the stress associated with having to remember to make timely, proper payments to creditors.
A great way to highlight the positive side of having work take care of certain financial matters such as remitting payments to creditors is for HR to sit down with employees and have a discussion on financial planning. It's possible to think of post-garnishment income as real income, and thus adopt perspective that when one owes child support obligations and other debts, not all wages earned are wages taken home. A $55,000 salary with child support can be reframed as a $42,000 salary without it, and garnishment can be presented as the service that makes such simplification possible.
The crucial point is that whether it be the employee addressing them directly or their employer getting involved, the employee's financial obligations exist and their creditors will have to be paid.
The Best Defense Is Prevention
"Employees who have no garnishment are earning, on average, approximately 25 percent (about $10,000) more per year than those carrying a garnishment," reports ADP RI. "Employers benefit from a lighter administrative burden and fewer workers who are stressed, humiliated, and distracted from taking home a garnished paycheck." This is a worthwhile reframing of the issue; in extreme cases, it's necessary to think of wage garnishment as a major, reliable cost of doing business, one that can be minimized by investing in other areas of the business.
There is also a more fundamental approach, open to those businesses with an abnormally large proportion of their workforce experiencing wage garnishment: rather than attempting to offset the emotional impact of wage garnishments on debt-ridden employees, an employer could mitigate that impact by investing in the workers future. By providing them with financial wellness education and other resources that can support them as they navigate the wage garnishment process, you can help them ease the burden now and give them the tools they need to prevent further garnishment-related issues down the line.
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