Efforts to drive your construction or material handling firm’s efficiency and costs down require an understanding of how garnishment laws in Indiana can affect your payroll. Garnishment is the legal term for actions that removes funds directly from an employee’s paycheck to pay debts, whether they are owed to the state or creditor. Many companies in construction and material handling, such as Vinay Industries, for example, also faced garnishment even though they may not have had a regular connection to this area of law. For Vinay Industries, a company that manufactures products that are capable of increasing productivity and lowering costs for companies in construction, industrial, agricultural, and material handling sectors, the impact of garnishment law was not as severe as it could have been. The company found itself dealing with questions about Indiana’s rules for garnishment once it became the target of garnishment based on a legal claim against its insurance broker. The garnishment was birthed from a discrepancy between the insurer’s fee schedules for landscape and general contractors versus home renovation contractors. Even though it was a fine distinction, it created a situation in which this client, with payroll of hundreds of workers across the country, was suddenly ordered to garnish the wages of specific workers. But the company didn’t stop there. After speaking with us and EMSI Legal, which specializes in enforcement of Indiana garnishment law, Vinay Industries began an effort to understand the financial implications of garnishment. By digging more deeply, company leaders found that it pays to take action to better manage the processes in place around garnishment and it pays to understand how garnishment laws will affect your payroll, workers, and, ultimately, the bottom line. Here are some of these key elements.
Garnishment is a method of debt collection and is used in the civil courts. When your business is garnished, your business acts as a collection agent for either the Department of Workforce Development, the Department of Revenue, or a private creditor. Garnishment is a serious thing for your employees. Within Indiana specifically, it’s governed under Indiana Code 35-42-7 and requires that you remove the amount prescribed from the employee’s wages. Garnishment amounts can be set as 25 percent of the employee’s take-home pay. We also know that it can be as much as 65 percent or more in some states. If you are faced with this as an employer in Indiana, you need to make any changes needed to payroll management procedures quickly. Understanding garnishment laws and what to do if you are targeted by proceedings is essential for construction companies and other industry players. The importance of Indiana’s Garnishment Law is evident in the charges included. Some of the biggest ones are failing to levy or serve garnishment, failing to deduct garnishment amounts from checks, failing to seek an Order from the court when a garnishment is served on the employee, and disobeying an Indiana garnishment order. The penalties include fines, penalties, costs, and even jail time. As an Indiana construction company, you may not think about garnishment on a regular basis. But, as seen with Vinay Industries, the law affects everyone and it pays to know more. You can begin by discussing your needs with EMSI Legal.
In the meantime, here are some of the most common forms of debt resulting in garnishment in Indiana. As an employer, the garnished employee is required to keep her job for a period of 180 days. This means that 180 days’ worth of income can hit your payroll out of nowhere, causing accounting and bookkeeping chaos. As an employer, you are required to follow the instructions outlined by the garnishment order and to file paperwork with the court. As noted above, Indiana specifically has detailed instructions on exactly what is required, so it pays to understand these. No one likes the idea of garnishment or being the third-party caught between an employee and future garnishment, but the reality is that it can happen to any Indiana employer. As a company like Vinay Industries discovered, there are ways around garnishment that help to mitigate the downtime and chaos. VPI ran the numbers on garnishment, plus talked with an expert in the area of garnishment, it was found that the total cost of garnishment in the case we’re talking about was $7111.00 across 180 days. That’s the amount that the company had to pay in administrative overtime to complete garnishment and management along with the remaining fees. It was a large amount and it was something the company wanted to prevent in the future. So, they started looking for ways to minimize the costs of garnishment.
So, where can an Indiana construction firm save money with garnishments? Cardboard boxes and other packaging products don’t really relate to garnishment or employee income. They are around to increase efficiency, to cut waste, and to make employee lives easier. However, they can be used to help with garnishment by reducing the amount of time employees spend sorting through garnishment paperwork. The goal is that VPI related to in this case, keeping employees focused on real work instead of having to build and fill mountains of paperwork. Here are some additional ideas for streamlining garnishment processing to keep costs in check. Of course, VPI does still pay the garnishment cost, which they deemed valuable in working the legal process to its natural end. But VPI’s message remains the same. Do what you can to get the costs down and limit the damage caused by garnishment. Like all things in managing your industrial or construction company, garnishment creates its share of legal issues, HR issues, cost, and inconvenience. Your job is to juggle all of this while your company continues to find customers and run efficiently. Like Vinay Industries learned, you can take a more proactive approach to dealing with garnishment and garnishment law before they create headaches.
In addition to the suggestions offered above, our team at EMSI Legal also recommends that you prepare for garnishment issues in advance by working with a professional who is familiar with Indiana garnishment law and how it typically creates problems for employers. Understanding how garnishment works today will help you to access the money you need to cover these expenses and to keep everything running smoothly. More than anything, a little planning and preparation will keep you ahead of these issues, ensuring that you aren’t dinged for mistakes or caught having to pay more than you should later. Talk to us about how to best handle this situation and keep your company on the right path even in the face of garnishment.