The deductions and payments of standard Federal/State taxes are mandatory, and most payroll processing systems manage it for you automatically. But be aware that taxes must be based on where the employee WORKS, not where they live or where the main office is located. This gets complicated when an employee works remotely from a different state than the main office, or if employees actively work in multiple states during a single pay period (which can be common for companies situated along state lines). Your payroll software may or may not easily handle these details, so you might want to double check your setup.

You must comply with wage garnishment orders, even if your employee says it's a mistake or that there's a new order coming out. Go with what you have until the government officially tells you otherwise. While you should notify the employee that the garnishment order was received and will be put into place, you don't need any formal employee acknowledgement or approval to make this deduction.

Because benefits are voluntary, at the employee's discretion, you must have the employee sign a deduction form with the specific amount clearly listed, along with pre-tax or post-tax documentation. You can verify tax status with your broker, as needed.

There are added complications for financial transactions that are not tied to insurance. This includes items purchased by the company and then expensed to the employee, such as tools. You MUST have employees sign a payroll deduction form for the EXACT amount of the deduction, and how the repayment will be divided up over time, if appropriate. Note: these de ductions are always post-tax, and cannot result in an employee earning less than minimum wage for all hours worked in a pay period. 

Despite what you may have heard, if an employee owes you money upon leaving the company (remaining loan balances, value of missing tools, etc.) it is ILLEGAL to just withhold that amount from their final paycheck. Even if you have a legal right to this money, you cannot withhold funds unless the employee approves: (1) the specific withholding amount (2) in writing (3) near the date of separation. That is: it's not valid if to have employees sign a new-hire document with blanket approval of final paycheck withholding, or tell you in person that the amount is okay. If the employee refuses to sign the final paycheck deduction form, you legally cannot make the deduction. HOWEVER, you can decide whether to pursue legal action to collect the rightfully owed debt, if it comes to that. 

How do you keep this all straight? And what about weird situations, which will inevitably come up? Remember that all wages become employee property the moment the employee earns them. Because the money legally belongs to the employee already, it's simply considered "on loan" to the company until the next scheduled pay date. It therefore cannot be withheld without consent (with minimal exceptions, like taxes). 

Any questions? Contact us and we're happy to help!