When a person's wages are garnished by a court or federal agency, employers have certain responsibilities they must uphold. These responsibilities are the same whether the employer uses an online payroll service or has its own in-house payroll department.
Wages can be garnished in order to collect on any number of legal debts. Some common examples include: back taxes, child support, bankruptcy settlement payments, etc. Garnishment is used as a means of forcing the debtor to pay by withdrawing money from the person's paycheck before he or she has an opportunity to spend it elsewhere.
Receiving a Garnishment Order
Employers are informed of wage garnishment through a Writ of Garnishment from either a court or federal agency. Federal agencies do not have to go through courts to obtain relief from outstanding taxes or federal student loans; they can order their own writs administratively. Most other forms of wage garment must go through state or federal courts.
Upon receiving a garnishment order, the employer has seven days to respond using a form that is sent with the order. The response can be one of two options:
1. the employer agrees to begin garnishing wages immediately; or
2. the employer informs the court the garnishment will not take place because a legal exception exists.
Assuming the first option, the employer must begin garnishing wages immediately. Money withheld through the garnishment is sent either to the agency that issued the order or the creditors designated therein.
Determining How Much to Withhold
Receipt of a garnishment order suggests employers immediately begin working with their online payroll providers to guarantee compliance. The payroll provider needs to know how much to garnish and to whom to send the money. Fortunately, the process of determining how much to withhold is relatively simple.
The court garnishment should include a calculation worksheet employers and payroll providers can use to figure out how much to garnish. And as a general rule, no more than 25% of a worker's disposable income can be withheld. There are two exceptions:
1. As much as 65% can be garnished for child support payments
2. Only 15% can be garnished to pay student loans.
Outside of these two exceptions, the 25% rule applies regardless of how many garnishments are currently in place. That means if 25% of a worker's wages is already being garnished, the employer cannot comply with the new order.
From time to time, workers may dispute court-ordered wage garnishments. In such cases, the employer's responsibility is still the same. They and their payroll providers must garnish wages while the dispute is being worked out. However, money is not sent to creditors. Instead, it is sent to the court or agency that issued the order to be held until the dispute is cleared up.
State laws differ as to how and when wage garnishments are terminated. Employers and their online payroll providers don't necessarily need to know all the details. Regardless of how state laws are set up, employers will receive an official Notice of Termination of Wage Garnishment Order when it comes time to stop garnishing wages. They must immediately cease and desist upon receiving such an order.
As an employer, you have certain responsibilities should a wage garnishment order be issued against one of your employees. Work with your online payroll provider or your in-house payroll department to ensure that any such orders are being fully complied with in accordance with state and feder