Join me for this Q & A about how to handle the tricky situations that arise when dealing with employee wage garnishments.
I will be offering some awesome tips for making the process run a little easier in the payroll office. Who is my HR Superstar for todays’s episode? I’ll give you a hint: She may be your secretary, but never ask her to serve you Tea! Got it? No? Then get in here and solve the mystery! I’ll see ya’ on the inside!
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EPISODE 3: WAGE GARNISHMENTS Transcript
Small Business Spoonfuls is a twice a week Q&S with Lisa Smith providing the answers you have about running your small business. Welcome back. Welcome to Episode 3 of Small Business Spoonfuls. I m Lisa Smith coming at you again from Atlanta, GA. I m so excited to be doing Episode 3 because I have received an awesome question that many small business owners and employers need to address.
That question is, I get so many child support garnishment orders in and then I will get a creditor garnishment or another sort of garnishment. How do I know what to garnish first? Such a good question. If you check the show notes at the end of this podcast, I m going to give you some links to some places to go out and take a look at some specifics that I cover. What I just want to give you the basics right now is that there is a hierarchy. There is no. 1 family support. Family support always comes first. That s what we say. If someone has a creditor garnishment, a family support garnishment. Maybe they have a federal student loan or something of that nature. Family
Maybe they have a federal student loan or something of that nature. Family support unless you are ordered otherwise is going to come first. We always say we pay the babies first. Let s pay those babies. The other thing we want to keep in mind is maybe there is one exception to that family support coming first and that is going to be if your employee also has a federal IRS tax levy coming out. There s a garnishment order for repayment to the IRS. If that IRS tax levy was issued before the family support order, technically it does take first place. There you go, you want to watch out for that; however, what most employers don t know is, as an employer you can call the IRS and you can say I am holding this levy here and I have a family support garnishment for this same employee. I was just wondering if you could waive your position on here, let me pay the babies and then give you whatever is left over. You make the determination. Then what they will probably do is ask you some questions about how much is the family support order, when was it issued. You will give them some basic information on that. Then very often, very often as a matter of fact, the IRS will submit a notice back to you that says this is what you do. Go ahead and pay the babies and we want the rest of the paycheck, or we want 50% of what is left over or we want this much money. They will set the terms so they can pretty much take whatever they want. They don t have to do
You make the determination. Then what they will probably do is ask you some questions about how much is the family support order, when was it issued. You will give them some basic information on that. Then very often, very often as a matter of fact, the IRS will submit a notice back to you that says this is what you do. Go ahead and pay the babies and we want the rest of the paycheck, or we want 50% of what is left over or we want this much money. They will set the terms so they can pretty much take whatever they want. They don t have to do this but they have been making those exceptions for many employees. That s a good thing. We always want the babies to have their child support and that s nice the IRS is working with not only employers but parents to make that happen. That s awesome. Keep that in mind. Pay the babies.
Then you are going to have things like a bankruptcy order that is coming through. You will have someone that filed bankruptcy and they have a garnishment order that comes through on that. That would fall below family support and the IRS levy if that would be an issue. It goes on down the list. The very end of the list is just those darn creditor garnishments. Not every state even allows a creditor to garnish wages. It doesn t mean they won t try. That s where you need to know your state laws. You have to understand are we allowed to accept creditor garnishments in our state. Definitely keep that in mind, because you don t want to be sending money to a creditor when it is actually illegal to do so. An employee might come back and ask for that money and you would have to take that money out of your company funds and give that to that employee. That is something to think about as well. At beauditsecure.com, we have the whole help desk suite of products and resources. They are all part of our authority membership level. Anyway, we have this one section called Help Desk for Account Receivables Professionals. In the AR Product, we have garnishment laws by state. What you are allowed to do as an account receivable professional and then also it includes just the general garnishment laws. For those of you listening in here, that are authority subscribers, you do have access to that AR module if you have never looked that up, then go check that out because we have those garnishment laws in there for you. That will no doubt be some help, not only for account receivable but for the payroll department who is dealing constantly with garnishments.
At beauditsecure.com, we have the whole help desk suite of products and resources. They are all part of our authority membership level. Anyway, we have this one section called Help Desk for Account Receivables Professionals. In the AR Product, we have garnishment laws by state. What you are allowed to do as an account receivable professional and then also it includes just the general garnishment laws. For those of you listening in here, that are authority subscribers, you do have access to that AR module if you have never looked that up, then go check that out because we have those garnishment laws in there for you. That will no doubt be some help, not only for account receivable but for the payroll department who is dealing constantly with garnishments.
I had some really nice advice when I was in Washington State. I was teaching a class on payroll there and the topic of garnishments came up. There was a gentleman in my class, who happened at the time, I don t know if he still is, but he happened to be in charge of all garnishments that were issued by the State of Washington. He was a big dog, let me put it that way. He raised his hand and he said could I just give some helpful advice from this side of the desk. I was tickled to death because I love it when I have an expert in class who can really stand up and say this is what we want you to do. That was wonderful. His main tip to employers that day was communication. He said I can t tell you the number of times a garnishment order for family support will go to an employer and they just don t understand it and they will just put it in a box of to do or to think about later. It kind of gets Scarlett
It kind of gets Scarlett O hara syndrome is what I call it. They just put it aside and then they never do anything else with it and before you know it, they are being held responsible for not honoring this garnishment order that they are by law supposed to address in a certain number of days. He said if you don t understand something, call us or the agency it was issued through. Call us please. We don t want you to end up in trouble as an employer and we do want the obligations lived up as it is required by law. I thought that was really good. His big tip though was when you call us, say the first words out of your mouth need to be, I am an employer. He said all the time he has employers who call up and they answer the phone and the first thing they hear is Hi, this is Lisa. I received this garnishment order and I need to talk to somebody about it. I don t know how to really process it or I don t know what it means. It is not clear immediately that this person is an employer. They sort of go into
It is not clear immediately that this person is an employer. They sort of go into auto pilot for a moment while the person on the other side of the phone is rambling. He said honestly, if you just say Hi, I am an employer. My name is Lisa and I have a question about a garnishment that came from your office. Then that immediately perks up their ears. They put you to the top of the queue and they get someone to assist you immediately if they can t actually assist you with who answers the phone. He said it makes all the difference in the world in his office and probably all the offices around the country as well. Good tip. That sounds like something that should have been such a no brainer, but sometimes the things we think should be obvious are not. I just really appreciated him giving us that nice helpful reminder.
For garnishment orders, you definitely have to follow the rules on how much you can take out of a person s paycheck, what are the percentages, 50-60% for child support is going to be the norm. When you check out the show notes you will see the difference between 50 and 60%. Take a course on garnishments, take a payroll class that talks about garnishments because really and truly that is an area that you don t see a lot of activity in in the case law stuff but what we do know from research and having people tell us their horror stories, is that an employer who fails to honor a garnishment order, can be required to settle 100% of those missed payments or in some cases, 100% of the balance due on the order if it is a payoff on a debt or something as their penalty for not honoring it within the time limit specified. Very very important to know.
I had a lady in class one day who said her company had to pay a $2,500 Visa bill for an employee because they were in a state that accepted creditor garnishments but the creditor garnishment came in and got lost due to some disorganization. Well, next thing they know, it s a few months later and they are getting the notification stating they have to settle the entire debt for the employee and they are not allowed to go back and collect from the employee because it is the penalty to the company for not honoring the order. That was quite a difficult situation. Here you have an employee that is tickled to death you just paid off their Visa bill, but the powers that be in the company are not so thrilled at that point with the payroll department, because that cost the company $2,500 that an employee may have just charged on frivolous debt. Who cares what they bought. We don t like to pay off our employees Visa bills like that. Right? We don t want to pay anything like that that is not our own responsibility. She did not lose her job over it, she was the Payroll Manager, but she said there were some very tense conversations after this came up. We definitely want to keep that in mind. There you go, there is a little hot tip for the day on garnishment orders. Hopefully that answered the question that came in on the confusion that is there many times and again, access the show notes. Then you will be able to get more detail on that.
Okay, now we come to the time called HR Superstar. Yay. I love this segment. I love scouring my TV shows every week looking for something to talk about in HR. I bring up today a TV show called Madame Secretary. Madame Secretary is both a good example and a bad example of HR. Let s just talk about the good example, because in Madame Secretary, Madame Secretary is played by Tea Leona, if you haven t seen the TV show. It is about her character who is Elizabeth McCord and she is Secretary of State. She is Hillary Clinton s old position as Secretary of State. She has this full staff that she works with and they are always coming up with some problem. There are two of them that are dating. There is someone else who runs his mouth with some gossip and makes some trouble. There is someone else who drops the ball on a very serious diplomatic issue. How she handles these people is just always very brilliant so whoever writes this show, kudos to you for getting that right. Not everything is 100% right but I love the fact that when she is speaking to one of her employees, one of her staffers, she is always very by the book. When she can t be by the book, she doesn t say enough that gets herself in trouble but she does give them the message without actually saying the thing that could cause the problem. It is all very well handled and legal. I think one time there was an employee who was really going off and losing his mind over a certain thing and it really insulted her. She said you know, if I didn t like you so much, I would fire you over that, but instead, let s just talk about this. Then they just kind of did the thing where they broke it down and there was an apology and consider this your verbal warning and walk outside the room kind of thing. I just thought that was brilliant. We never see her documenting her conversations with her employees, but it is a TV show. They don t have time to show all the behind the scene stuff like that. I just think in general, they do a pretty good job in how she handles her workers and her staffers in her department. Kudos to Madame Secretary for getting HR mostly correct. HR Superstar this week goes out to Madame Secretary.
There you go. Alrighty, I have taken up about 15 minutes of your day and I am going to finish my day. You go and have a good one. I will see you on Episode 4.