Managing employee wage garnishments is a complicated process involving forms and calculations that vary depending on state, type of garnishment, and federal regulations. Staying compliant with these laws is complex and can present a challenge to employers when they receive a request.

Some garnishments require a court order; others do not. Either way, an employer is usually required to begin withholding the correct amount from the employee’s wages and remitting payments immediately after receiving the garnishment summons. Failure to do so within the specified time frame can result in penalties.

What is a wage garnishment?

A wage garnishment is a legal or equitable procedure through which some portion of a person’s earning is required to be withheld by an employer for payment of a debt (U.S. Department of Labor). Child support, alimony, unpaid taxes, and default of student loans are commonly paid through wage garnishment and do not require a court order. Most states allow garnishment for debts like credit card balances (North and South Carolina, Pennsylvania, and Texas do not), but those types of debt require the creditor to sue and obtain a court judgement against the debtor and the right to garnish.

How are the amounts of wage garnishments determined?

State and federal laws limit the amount of earnings that can be withheld from an employee’s salary. Title III of the Consumer Credit Protection Act (CCPA) requires that the amount of earnings withheld be based on an employee’s “disposable earnings.” This is what remains after taxes and other legally required deductions have been made. (Voluntary deductions like health insurance, retirement plans, union dues, charities, etc. usually are not included in allowed deductions.)

The amount withheld depends on the type of garnishment and ranges from 15% for student loans to 60% for child or spousal support. This rises to 65% for debtors more than 12 weeks in arrears.

Federal regulations limit the amount of garnishment collected by judgement creditors to no more than 25% of disposable income or the amount your income exceeds the federal minimum wage—whichever is less.

As mentioned above, state regulations vary, and some use an employee’s gross income as the base for deductions. However, states can offer more protection, never less, than the federal government. The employer is required to garnish the smaller amount.

Garnishment priorities

In some instances, one employee may have multiple garnishments. Usually the first garnishment order has priority, but orders for child support and IRS levies take precedence. If the maximum amount allowed is already being withheld when one of these two garnishment orders is received, the other garnishment(s) will stop so the ones with priority can begin. The employer must follow state and federal rules when prioritizing wage garnishments.

Employee protections

Under Title III of CCPA, an employee cannot be fired for having one or more garnishments from the same creditor. However, that protection does not extend to an employee who has more than one garnishment from different creditors.

In many states, particularly if the garnishment required is for child support, an employer may charge an administrative fee for processing. Here’s a comprehensive list of individual state child support garnishment withholding requirements and appropriate contact information.

EFT or paper check? 

While some garnishments are payable by check, in cases involving Child Support where the state mandates electronic remittance, Sage HRMS Payroll can be used to electronically transmit the payment to the appropriate agency. Here’s a list of states that require electronic child support payments

In order to stay compliant with all state and federal regulations, an employer must stay abreast of these requirements and any changes. Many organizations that use Sage HRMS employ a software solution like Sage HRMS Garnishment Manager, to make sure they do not incur penalties because something slipped through the cracks! Garnishment Manager supports all federal regulations and rules of all 50 states as well as CCPA wage limit tests. Using data entered into Sage HRMS Payroll, it dynamically calculates disposable pay, prioritizes multiple garnishments, and updates the employee’s time card with proper deduction values. 

 

Learn More

Garnishment Manager for Sage HRMS is a plugin for Sage HRMS Payroll designed to help you properly prioritize and calculate garnishments in accordance with state and federal laws.

Learn More

Related Success Stories

Mary van Balen
Mary van Balen
Technical Writer at Delphia Consulting

Mary van Balen is based out of Columbus, Ohio and is a writer for Delphia Consulting. Mary contributes to the Delphia blog on Human Resources issues and Delphia Consulting and Sage product related updates.