Wage garnishment is a legal procedure where a portion of an employee’s earnings are withheld by their employer and sent to another party, such as a creditor or government agency, to satisfy a debt or legal obligation. For companies with international teams, navigating the complexities of wage garnishment across different countries can be challenging. This guide provides an overview of key considerations for HR and finance leaders managing global payroll and compliance.

Understanding Wage Garnishment

Wage garnishment can be initiated for various reasons, including:

• Child support and alimony
• Unpaid taxes
• Defaulted student loans
• Consumer debts (credit cards, medical bills, etc.)
• Court-ordered fines or restitution

When an employer receives a wage garnishment order, they are legally required to withhold the specified amount from the employee’s paycheck and remit it to the appropriate party. Employers must comply with these orders or face penalties.

Wage Garnishment Regulations

In the U.S., wage garnishment is regulated under the Consumer Credit Protection Act (CCPA), which sets limits on the amount that can be garnished from an employee’s disposable earnings. States may have additional laws that provide greater protection for employees.

Other countries have their own specific regulations around wage garnishment. For example:

• United Kingdom: Wage garnishment is called “attachment of earnings” and can only be initiated for certain debts like taxes, child support, and court fines.
• Australia: Garnishment orders are issued by the courts and administered by employers, with protected earnings amounts based on the employee’s circumstances.
• Canada: Each province has its own wage garnishment laws specifying the types of debt that can be collected and the maximum amounts that can be garnished.

Employer Responsibilities

When an employer receives a wage garnishment order, they must:

1. Notify the employee of the garnishment
2. Calculate and withhold the appropriate amount each pay period
3. Send withheld funds to the designated recipient
4. Stop garnishments when the debt is satisfied or the order expires
5. Maintain detailed records of garnishments

Employers are prohibited from discriminating against or terminating an employee due to wage garnishment. However, employees may face termination if they receive multiple garnishment orders.

Best Practices for Global Employers

To effectively manage wage garnishment for international teams, employers should:

• Stay current on regulations: Monitor changes to wage garnishment laws in all countries where employees are located. Consult with local legal counsel for guidance.
• Establish clear policies: Develop and communicate company policies around wage garnishment, including employee rights and responsibilities.
• Use compliant payroll systems: Ensure payroll software can accurately calculate and track garnishments across multiple jurisdictions.
• Maintain documentation: Keep detailed records of all wage garnishment orders, payments, and related correspondence.
• Provide employee support: Offer resources to help employees manage financial challenges and avoid garnishments, such as financial planning or employee assistance programs.

Conclusion

Wage garnishment is a complex and sensitive issue for global employers. By understanding the regulations, establishing clear processes, and supporting employees, companies can mitigate compliance risks and minimize the impact on their workforce. With the right approach, wage garnishment can be managed effectively across international teams.