What Is a Wage Garnishment?


You’ll have an worker whose wages are topic to garnishment sooner or later. What’s a wage garnishment? And what do you should do?

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What’s a wage garnishment?

Garnishment is a technique of accumulating cash from an individual with overdue money owed. When an worker has unpaid money owed, a court docket or authorities company may order you to withhold extra cash from their paycheck. The withheld wages go towards repaying the worker’s money owed.

Most garnishments are court-ordered. The IRS, state tax assortment companies, and different non-tax authorities companies can even order garnishments for unpaid money owed.

Forms of money owed that result in garnishment 

A creditor might search a garnishment to gather unpaid money owed akin to: 

  • Overdue little one help
  • Unpaid taxes
  • Defaulted authorities scholar loans
  • Delinquent bank card loans
  • Excellent medical payments

Garnishment legal guidelines 

Each federal and state legal guidelines that shield workers who’re topic to wage garnishment. Perceive garnishment legal guidelines to keep away from penalties and jail time

Federal garnishment legislation 

Federal wage garnishment legislation protects workers by putting restrictions on the garnishment course of below Title III of the Client Credit score Safety Act. Employers who violate Title III might face a tremendous, jail time, or each.

The Client Credit score Safety Act:

  • Limits the quantity that may be garnished 
  • Offers job safety to workers with a garnishment for one debt 

State garnishment legal guidelines 

Some states have legal guidelines about garnishing worker wages. For instance, the state may set decrease garnishment limits or shield workers with a couple of garnishment.

In case your state has garnishment legal guidelines which can be extra favorable to your worker, observe state legal guidelines. In any other case, observe the federal rules. Search for garnishment legal guidelines by state for extra info.

Who’s concerned in wage garnishment? 

There are a number of events concerned in wage garnishments, together with:

  • Collectors: A creditor can contain the courts to fulfill a debt, akin to little one help, by garnishment.
  • The courts: The courts challenge a garnishment order that includes a third-party (e.g., employer) and requires them to pay some or all the debt. 
  • Authorities companies: Typically, authorities companies get entangled in and order garnishments. For instance, the IRS might challenge a wage garnishment if an worker owes taxes.
  • Employers: The employer, or “garnishee,” is chargeable for complying with a wage garnishment order by withholding and remitting funds. Employers are additionally chargeable for complying with wage garnishment legal guidelines.
  • Workers: The worker is the occasion whose wages are topic to garnishment.

Employer wage garnishment pointers

Coping with payroll taxes and different deductions could be sophisticated should you run payroll by hand. Receiving a garnishment order can add to that stress, particularly should you’ve by no means been a garnishee earlier than. 

Check out the next worker garnishment guidelines to get began. 

1. How does a wage garnishment work? 

If you should garnish an worker’s wages, you’ll obtain a garnishment order telling you so. Withhold the worker’s wages in keeping with the order.

You might need to reply the order. If that’s the case, you will need to ship proof that you just make use of the employee and report how a lot they earn. The sender may also require extra info. 

If the garnishment order lists an finish date, make sure you fastidiously learn the order and finish on the proper date—even when there’s remaining debt. Or, the company that despatched the order might ship a “Discover of Termination of Wage Garnishment Order” that tells you when to cease the garnishment. 

2. Which wages could be garnished?

Most sorts of wages are topic to garnishment. These embrace:

  • Hourly wages
  • Salaries
  • Bonuses
  • Commissions
  • Pension or retirement plan revenue

Tip revenue is usually exempt from garnishments.

Solely an worker’s disposable earnings are topic to garnishment. Disposable earnings are what’s left after you subtract legally required deductions from an worker’s wages, akin to federal, state, and native taxes. Don’t subtract non-required deductions, akin to well being and life insurance coverage and retirement plan contributions, when calculating disposable earnings. Consequently, an worker’s disposable earnings and internet pay may differ.

3. How a lot to withhold

The garnishment order will let you know how a lot to withhold out of your worker’s wages. Nonetheless, garnishment legal guidelines might shield a number of the worker’s wages from garnishment to make sure that the worker has sufficient take-home pay. You may withhold lower than the garnishment order states.

Comply with the garnishment limits to keep away from withholding an excessive amount of from the worker’s wages. The order ought to embrace a calculation worksheet to make sure you withhold the correct quantity.

The Client Credit score Safety Act protects the garnishee by limiting the quantity of wages that may be garnished. The utmost quantity that may be garnished from wages depends upon the kind of debt.

Garnishments for judgment collectors

A judgment creditor is somebody who wins a financial award in a lawsuit. 

If a judgment creditor garnishes wages, they can’t take greater than:

  • 25% of the worker’s disposable earnings, or
  • The quantity that the worker’s disposable earnings exceed 30 instances the federal minimal wage, which is $7.25

Let’s say an worker earns $500 in disposable private revenue per week. Twenty-five % of the disposable revenue is $125. The quantity that the disposable revenue exceeds 30 instances the federal minimal wage ($7.25 X 30 = $217.50) is $282.50 ($500 – $217.50). You possibly can solely garnish as much as the decrease of the 2 numbers. This implies essentially the most you may garnish from the worker’s disposable revenue is $125.

U.S. Division of Labor Reality Sheet #30 has a chart to assist decide the utmost quantity you may garnish.

Little one help and alimony

If the worker doesn’t help one other partner or little one, as much as 60% of disposable private revenue could be garnished for little one help or alimony. If the worker does help one other partner or little one, you may garnish as much as 50% of disposable earnings for alimony or little one help withholding. For funds which can be greater than 12 weeks overdue, an extra 5% could be added.

Non-tax federal money owed

Companies that fall below the Debt Assortment Enchancment Act can garnish as much as 15% of disposable earnings for money owed owed to the federal authorities.

Division of Training companies can even garnish as much as 15% of disposable earnings for defaulted federal scholar loans.

Non-tax federal money owed are topic to federal garnishment legal guidelines for max wages garnished in a pay interval. They aren’t topic to any state garnishment legal guidelines.

Exceptions to wage garnishment limits

Most garnishment restrictions usually don’t apply to chapter court docket orders or unpaid federal or state taxes. Meaning there isn’t a garnishment cap for unpaid taxes and chapter court docket orders. 

4. Job safety

Below federal legislation, you can’t hearth an worker due to a garnished debt. Nonetheless, this federal safety applies if an worker’s pay is garnished for just one debt. In accordance with the Division of Labor, “The CCPA doesn’t prohibit discharge as a result of an worker’s earnings are individually garnished for 2 or extra money owed.”

Your state might have additional protections. Examine with state garnishment legal guidelines for extra info.

What does a garnishment appear like on a pay stub?

You and your worker may marvel how a garnishment seems on a pay stub. Let’s say you obtain a garnishment order for little one help. 

Right here’s how the garnishment would look on a pay stub:

What does a garnishment look like on a pay stub? Example from Patriot's payroll software.
Instance pay stub from Patriot’s payroll software program displaying little one help withholding.

Whether or not an worker has a garnishment or not, payroll is complicated. Patriot Software program’s on-line payroll makes it simpler. You possibly can arrange deductions, akin to garnishments, and we’ll do the calculations for you. Strive it in the present day!

This text is up to date from its unique publication date of February 29, 2016.

This isn’t meant as authorized recommendation; for extra info, please click on right here.


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