Third-Party Payments: Getting Garnishments and Deductions Out the Door
Court orders, union dues, pension providers, third-party payments must be right and on time or you're in legal trouble, not just admin trouble.
Third-party payments are the deductions that leave your payroll and go to someone else, court-ordered garnishments, union dues, pension providers. Get these wrong and it's not an admin slip, it's a legal problem, because a missed garnishment can put the employer in contempt.
Configure the third-party payees properly
Each recipient, the court, the union, the provider, is set up as a payee with correct payment details and rules. Sloppy payee setup means money going late or to the wrong place, both of which have consequences.
Respect the priority and limits
Garnishments have legal priority orders and protected-earnings limits, you can't take someone below a legal minimum. Configure the deduction rules to honour those limits automatically, not by manual check.
Prove the payments went out
You need an audit trail showing what was deducted and paid, to whom, when. When a court or auditor asks, 'we think we paid it' isn't an answer.
Real scenario: a client processed a garnishment but the payee bank details were stale, so the money bounced and sat unpaid for two months. The court came knocking. We tightened payee setup and added a payment-confirmation check. Legal exposure closed. This is one area, where 'roughly right' isn't good enough.