When it comes to employee compensation, it’s always a good idea to become familiar with two sets of laws: federal and state. While national laws normally offer baseline protection for wage-earners, state laws are typically more stringent and vary greatly from one area to the next. Deducting part of an employee’s pay for some work-related expenses is legal in certain instances, but it must be done under strict adherence to the rules to avoid legal tangles. Wage garnishments involve outside creditors and are subject to another set of regulations regarding legality and amounts.
Payroll Deductions for Necessary Items
Payroll deductions are a way some business owners pass on various costs of everyday commerce to their employees. While there are instances in which this is legal, there are stringent regulations regarding the amount that may be taken from an individual’s paycheck. For items regarded as necessary, wages may be reduced as long as the individual’s earnings do not decrease below the national minimum hourly wage. Essential items may include the following:
While there are other items that may be deemed eligible for a payroll decrease, the object must be proved necessary for daily job completion.
Payroll Deductions for Business Losses
While it may be tempting to pass off business losses to employees, it is not always legal to do so. In cases of unreturned property, the Fair Labor Standards Act allows employers to reduce wages for items such as phones, computers and other business property as long as wages stay at or above the national minimum. Commonly, these situations crop up after an employee quits or is terminated.
Another instance when it is allowable for companies to make payroll deductions is for meals and lodging, but only if those items are regularly provided to employees in that job sector. In these cases, incomes may dip below the minimum hourly wage, although several states require a signed, written agreement between employer and employee to make the subtraction legal.
If an employee damages or destroys property during the course of employment, their establishment might be allowed to reduce their wages in an effort to gain compensation for the loss. Federal law allows for these reductions as long as hourly pay stays at the minimum wage. States, however, usually view this process with a stricter eye and many have rigid guidelines. Many states allow the deduction if the employee acted in gross negligence, but not for ordinary accidents.
Wage Garnishment for Taxes
Wage garnishments are normally set in motion by the court or other federal or state agency. The IRS can garnish wages for back taxes without any court action and is allowed to take a large percentage of an individual’s pay. Employers will receive notification of the pending levy and must provide a copy of the letter to the individual. The total garnishment depends on several factors, such as dependents and standard deductions and is determined by information the employee must provide back to the IRS upon receiving the garnishment notification. States can also dip into an employee’s check for unpaid taxes. The allowable amount differs by state and can be found by contacting the state labor department.
Wage Garnishment for Other Debts
Student loan debt may also come under garnishment without court action, and those in arrears may see up to 15 percent of their check taken to pay these debts. There are a variety of other obligations that, if unpaid, may result in a court-ordered wage garnishment. Unpaid child support can take up to 60 percent of an individual’s check.
Even credit card or other obligations can qualify for garnishment, though it must come by way of a court judgement. While it isn’t legal to fire or punish an employee for one such garnishment, once two or more crop up, employees lose federal, and sometimes state, protection.
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