Wage Garnishment

How wage garnishment works for employers

The employer is not a party to the debt; it is the stakeholder holding the employee's wages. When an order arrives (from a court, a state child support agency, the Department of Education or the IRS), payroll has to:

1. Confirm the person is a current employee and the order is valid for your state.
2. Return any required answer or acknowledgment by the deadline on the order.
3. Start withholding on the timeline the order sets. For child support income withholding orders, that is generally no later than the first pay period after 14 days following the date the order was sent.
4. Calculate the amount each pay period based on disposable earnings and the applicable limit.
5. Send payments to the right agency on time; child support must generally be remitted within seven business days of payday.
6. Notify the issuing agency when the employee leaves.

Ignoring an order or under-withholding can make the employer liable for the amount it should have withheld.

Federal limits under the CCPA

Title III of the Consumer Credit Protection Act sets the federal limits.

• Ordinary debts (credit cards, medical bills, personal loans): the lesser of 25% of disposable earnings or the amount by which weekly disposable earnings exceed 30 times the federal minimum wage.
• Child support and alimony: up to 50% of disposable earnings if the employee is supporting another spouse or child, 60% if not, plus 5% more in each case if the support is more than 12 weeks in arrears.
• Federal student loans (administrative wage garnishment by the Department of Education): up to 15% of disposable pay.
• Federal tax levies: not subject to the CCPA limits; the IRS sends a notice showing the exempt amount, based on the employee's filing status and dependents.
• Bankruptcy court orders and state tax debts are also outside the CCPA percentage limits.

Many states set lower limits than federal law, and the rule that protects the employee more applies. A few states, including Texas, Pennsylvania and North Carolina, do not allow garnishment for most ordinary consumer debts. Rules vary by state, so payroll systems should apply the employee's work state rules.

Multiple garnishments and priority

When one employee has several orders, priority usually runs: child support first, then federal tax levies (depending on when they were received relative to support orders), then other orders by the date received. The total withheld for ordinary creditors cannot exceed the CCPA limit, so a second creditor order often gets nothing until the first is satisfied. Child support orders from multiple families are split according to state allocation rules. This is where manual calculation goes wrong; most payroll systems handle it, but only if each order is coded with the right type and priority.

Employee protections

The CCPA prohibits firing an employee because their wages have been garnished for any one debt. It does not protect against termination for a second, separate debt, but many states go further. Treat garnishments as confidential payroll information; share them only with people who need to know. Employers may be allowed to charge a small administrative fee per payment in some states, but it counts toward the limit and should be checked against state law.

Common mistakes

• Subtracting voluntary deductions such as health premiums or 401(k) deferrals before applying the limit, which shrinks disposable earnings incorrectly.
• Applying a garnishment to the gross amount of a bonus without recalculating disposable earnings for that check. Bonuses and commissions count as earnings for garnishment.
• Missing the answer deadline on a creditor garnishment.
• Continuing to withhold after the debt is paid or the order is released.
• Withholding from a final paycheck without applying the same limits.

Review new orders within a day of receipt, and route them all through one payroll contact so nothing sits in a manager's inbox. For the broader process, see payroll.