What You Need To Know About Wage Garnishments

Wage garnishment, according to the Department of Labor, protects employees from discharge by their employers because their wages have been garnished for any one debt, and it limits the amount of an employee’s earnings that may be garnished in any one week.

So what does that really mean and how does it apply to you? In the simplest of terms, a wage garnishment is when an employer withholds some of an employee’s salary because of a debt owed for things like child support, alimony, bankruptcy or unpaid taxes. 

  • It is normally court ordered
  • There is a limit on how much the employer can hold in one week
  • Employees can’t be fired for one debt, regardless of the number of levies
  • But, more than one debt? Employers do have the right to release the employee

Restrictions and Exceptions

Garnishment payment is based on the employee’s disposable earnings. Disposable earnings are:

  • Whatever is left after taxes are removed
  • Not unemployment insurance and Social Security
  • Not voluntary wage assignments (health insurance, union dues) 

If the garnishment is for a court order other than child support, bankruptcy or taxes, the weekly garnishment amount may not exceed the lesser of either:

  1. 25% of the employee’s disposable earnings, OR
  2. The amount that the employer’s disposable earnings are greater than 30 times the federal hourly minimum wage. 

Now, to make things a little more confusing, not all of these restrictions apply to every single bankruptcy court order or tax debt. Also, states may have different laws regarding wages, which then changes the garnishment amount. If that is the case, go with the smaller garnishment.

Some of these restrictions and rules can get complicated, so be sure to visit the United States Department of Labor for details and examples. Plus, since wage garnishments heavily effect payroll processing, that can add a higher level of uncertainty so be sure you understand all the implications of wage garnishments. 

Specific Wage Garnishments

Child Support and Alimony

Here are the facts about child support and alimony, common court-ordered wage garnishments:

  • These garnishments get priority over all others
  • Garnishments can get as high as 50% of wages if the employee is supporting a spouse or child
  • If the employee isn’t supporting another spouse or child, garnishments could go as high as 60%
  • An added 5% can be garnished for support payments 12 or more weeks in arrears
  • The more current family support payment is generally given priority over the payment(s) in arrears

Multiple Garnishments

Let’s say an employee has several garnishments and their salary can’t cover all of the debt owed. Then the employer has to choose which garnishments take priority. Employers can check out their states’ laws to help determine which garnishments come first. 

Non-Tax Debts Owed to Federal Agencies

  • Federal or collection agencies with contracts may garnish up to 15% of earnings to repay debts
  • The Department of Education’s guaranty agencies can garnish up to 10% of earnings for federal student loans
  • These withholdings must follow federal wage garnishment laws, not state

There are several reasons an employee might have a wage garnishment. You can only imagine how complicated the calculations can get. BenefitMall is here to help you. We can offer the professional advice you need, plus all the tools like employee reporting, payroll streamlining and payroll tax compliance for your small business. Ask us for our advice today!

BenefitMall Wage Garnishments

So which one works for you? As a small business owner, you need the consistency and set plan not only for keeping payroll reporting streamlined and accurate, but to also give your employees stability and consistency with wage garnishments. With BenefitMall, we make it easy to set up your payroll with our online software and choose employee options that best suite your company and your employees. Not only do we make these choices simple, our top-notch payroll software makes payroll reporting, tax compliance and HR adminstrative tasks easy again. Let us set it up for you!

See how PayFocus Pro can streamline your payroll & HR tasks here