National Payroll Week starts on Labor Day each year and is intended to celebrate America's workforce and the payroll professionals that pay them. During this week, payroll professionals and government agencies come together to help educate employees about their paychecks. With this in mind, we answer common questions related to garnishments, deductions, and timing and frequency of pay.
Q: What is a wage garnishment?
A: A wage garnishment is generally a court or agency order for an employer to withhold a certain amount of a worker's wages for the payment of a debt, such as child support.
Q: What is the garnishment process?
A: The employer will typically receive a notice or order of garnishment that contains information about who is subject to the order, when to begin withholding, how much to withhold, and how and where to remit payments. The order may also require a response from the employer. The employer should give the employee a copy of the order and then begin withholding in accordance with it.
Q: Are there any limitations on how much an employer can withhold for a garnishment?
A: Federal law and many state laws have restrictions on how much of a worker's wages may be subject to wage garnishment(s). Where state law differs from federal law, the employer must generally observe the law resulting in the smaller garnishment.
Q: For one of my employees, I have received a garnishment order for child support and a federal tax lien. What happens now?
A: With the exception of a federal tax lien that was entered before a child support order, child support orders generally take priority over all other claims against the same wages.
Note: When determining the priority of multiple garnishment orders, it's a best practice to ask the court or agency that initiated the garnishment and consult legal counsel as needed.
Q: What deductions from pay are permissible?
A: The Fair Labor Standards Act (FLSA) and state laws govern the circumstances under which employers are permitted to make pay deductions. Under the FLSA, these restrictions differ depending on whether the employee is classified as an exempt or non-exempt employee.
Generally under the FLSA, the deduction must not reduce a non-exempt employee's pay below the minimum wage or cut into any overtime pay due. Items for which deductions may not reduce a non-exempt employee's pay below the highest applicable minimum wage (federal, state, or local) or cut into the employee's overtime pay include, but are not limited to:
- Cash shortages;
- Work tools used by the employee;
- Employer-required uniforms;
- Damages to company property by the employee or any other individual;
- Financial losses due to clients/customers not paying bills; and
- Theft of company property by employees or any other individual.
If a non-exempt employee works overtime, deductions are limited to the amount that could be deducted if the employee had only worked a 40-hour week.
IMPORTANT: Your state law may further limit your ability to deduct certain items from employees' wages.
Under the FLSA, employees who are classified as exempt from overtime must receive a set salary for each week in which they perform any work. Deductions from an exempt employee's salary are only permitted in the following limited circumstances:
- When an employee is absent for one or more full days for personal reasons other than sickness or disability;
- For one or more full day absences due to sickness or disability if the deduction is made according to a bona fide plan, policy, or practice of providing compensation for salary lost due to illness;
- To offset jury or witness fees, or for temporary military duty pay;
- For penalties imposed in good faith for infractions of safety rules of major significance;
- For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace misconduct;
- In the employee's first or last week of employment if the employee does not work the full week; or
- For unpaid leave taken by the employee under the Family and Medical Leave Act.
Q: Do I need to obtain the employee's consent before making deductions from pay?
A: Under the FLSA, employers are generally required to obtain an employee's consent before they subject the employee to a permissible deduction. The agreement must be specific concerning the particular items for which deductions will be made, the employee must know how the amount of the deductions will be determined and should be in writing. Your state may have additional requirements.
Pay Frequency and Timing:
Q: How frequently do I have to pay my employees?
A: While federal law does not regulate how often you must pay employees, several states do. Some states require that employers pay employees at least weekly or bi-weekly. Some states also vary their pay frequency requirements based on whether the employee is classified as exempt or non-exempt. Check your state law to ensure compliance.
Q: Our state allows biweekly pay schedules and we'd like to change from a weekly to biweekly pay cycle. Do we have to give advance notice to employees?
A: Many states require employers to provide a certain amount of notice to employees before implementing pay schedule changes. In the absence of a specific notice requirement, it's a best practice to provide at least two weeks' notice.
Q: I have a lag pay cycle (employees are paid two weeks after the end of the pay period). A new employee is complaining that this is against the law. Is it allowed?
A: Check your state law. Some states require employers to pay employees within a shorter timeframe following the end of the pay period, such as within seven days.
Q: One of my employees is leaving. When is their final pay due?
A: Under federal law, final pay is generally due by the next regular payday, but many states require final pay sooner. In some states, this timeframe differs depending on whether the employee initiates separation (voluntary termination) or the employer initiates separation (involuntary termination). For example, California requires final pay immediately for involuntary terminations. For voluntary terminations, the state requires final pay within 72 hours. However, if the employee provides at least 72 hours of notice, final pay is due on the employee's last day.
Note: Some states have different final pay deadlines and other rules for commissions, bonuses, and other special situations.
Q: An employee quit and has failed to return a company computer. Can I withhold their final paycheck until they return it?
A: Generally, employers may not withhold final pay until an employee returns company equipment. Employers must meet the applicable final pay deadline even if the employee hasn't returned company property.
Q: Do I have to pay employees for unused vacation time when they leave my company?
A: Several states require employers to pay employees for accrued, unused vacation time upon separation. Other states allow employers to exclude unused vacation time from final pay but only if they have a written policy that explicitly states that employees will not be paid for any accrued, unused time upon separation. Check your state law to ensure compliance.
Review your pay practices to ensure that your garnishments, deductions, and pay schedules are in compliance with federal and state laws.