Wage garnishment for employers: processing an order
How payroll answers a garnishment order, works out disposable earnings and applies the right limit for each kind of order.
When a wage garnishment order arrives, payroll has to act on it: answer it, work out the right amount each pay period and send it on. The order sets the debt, but federal law sets the most you may withhold, the Department of Labor explains and the limit depends on who sent the order.
- of disposable earnings or the part above $217.50 a week, for a creditor’s court order
- 25%
- of disposable earnings for child support, depending on the family and arrears
- 50% to 65%
- of disposable pay for a federal agency or federal student loan order
- 15%
How payroll handles garnishments, step by step
- Identify the order. A court writ or earnings withholding order from a creditor, an Income Withholding for Support form, an IRS Form 668-W levy or a federal agency’s administrative wage garnishment order. Check it names your employee and has not expired.
- Answer by the deadline. Most orders come with an answer, interrogatory or certification form for the court or agency. Missing it can make the business liable for the debt.
- Give the employee their copy or notice when the order or your state’s law tells you to.
- Work out disposable earnings each pay period, then apply the limit for that kind of order and the priority rules below.
- Withhold and send on the schedule in the order, from the first pay period it names. Keep a record of each payment.
- Stop when released, or tell the sender if the job ends.
Disposable earnings: what to subtract
Disposable earnings are what is left after deductions required by law, per Fact Sheet 30: federal, state and local income tax, the employee’s Social Security and Medicare, state unemployment and disability taxes and required retirement contributions. Health insurance, voluntary retirement, union dues and the like are not subtracted for an ordinary garnishment. Administrative wage garnishment is the one exception: it also takes health insurance premiums off first, under 31 CFR 285.11.
Payroll garnishment limits by type of order
| Order | The most you may withhold |
|---|---|
| Creditor’s court order (card, medical, loan, rent) | The smaller of 25% of disposable earnings or the amount above 30 times the federal minimum wage, $217.50 a week (15 U.S.C. 1673, 29 CFR 870.10). A lower state limit wins. |
| Child support or alimony | 50% if the employee supports another spouse or child, 60% if not, plus 5% for support more than 12 weeks behind. The form gives the dollar amount; see the federal child support office’s employer pages. |
| Federal student loan or other federal agency | 15% of disposable pay and never below $217.50 a week (31 CFR 285.11, 20 U.S.C. 1095a) |
| IRS levy (Form 668-W) | Everything above the exempt amount in Publication 1494 for the employee’s filing status and dependents |
The figures are weekly; for other pay periods use the multiples in 29 CFR 870.10 or run a check through the wage garnishment calculator.
When an employee has more than one garnishment
Support comes first. A child support order served before an IRS levy keeps priority over the levy, under 26 U.S.C. 6334 and a support order outranks an administrative wage garnishment whenever it arrives. Between ordinary creditors, many states process orders one at a time in the order they were served. The total for ordinary debts stays under the 25% cap and if support already takes 25% or more, nothing more can go to an ordinary creditor.
What the law asks of employers
- No firing over one debt. 15 U.S.C. 1674 bars discharging an employee because of garnishment for a single debt; a willful violation can bring a fine and jail time.
- Liability for missed withholding. An employer that ignores a federal agency order is liable for what it should have withheld (31 U.S.C. 3720D) and one that fails to honor an IRS levy can owe the amount itself (26 U.S.C. 6332). State courts can hold employers liable on creditor orders too.
- Your normal paydays. A federal agency order does not make you change your pay cycle; withhold on the paydays you already use.
When an employee asks how to stop it
Payroll has to follow the order, but the employee often has ways to lower or end it: an exemption claim, a hearing, a payment plan or a hardship release. They can call 833-991-9547 and a specialist goes through their order with them for free.
Payroll garnishment questions
Can I fire an employee because of a wage garnishment?
Not for garnishment over one debt. Federal law bars firing someone because their earnings were garnished for a single debt, however many orders that one debt brings. Some states protect workers with more than one.
Do bonuses and commissions count?
Yes. Earnings for garnishment include wages, salary, commissions, bonuses and periodic pension payments, so withhold from them too.
What if the employee quits or is let go?
Tell whoever sent the order, using the answer or notice form that came with it and stop withholding from that point. Support orders usually ask for the new employer’s name if you know it.
Which deductions come off before I apply the limit?
Only the ones the law requires: federal, state and local income tax, the employee’s Social Security and Medicare, state unemployment or disability tax and required retirement contributions. Voluntary deductions like health insurance stay in for ordinary garnishments.
Is it your own pay being garnished?
Payroll has to follow the order, but the employee can often get it lowered or released. Call now and a specialist goes through the order with you for free.
Call 833-991-9547