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If you’ve received a wage garnishment order for one of your staffers, there’s no need to worry! When you have employees, you’re going to have to deal with payroll surprises from time to time. Working a garnishment into your workflow shouldn’t be a big deal if you’ve got a good payroll process figured out. So, read on to learn everything you need to know to handle employee wage garnishments painlessly.
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Check our list of payroll terms and acronyms for more information and definitions.
What are wage garnishments?
When a court or government agency determines that a debt is owed, it may order an employer to withhold funds from an employee’s paycheck until the debt is settled. These wage garnishment orders typically come to employers in the form of a court order, but some governmental agencies may issue orders without going through the courts.
Once you receive an order, you’re on the hook to deduct a certain amount of your employee’s paycheck each pay period until their debt is satisfied.
What are some common types of wage garnishments?
One of the most common types of wage garnishment is for child support. When a parent falls behind on their payments, a court can order employers to pull missing child support payments from their wages. But garnishments may also come a number of other places. Other common types include:
- Spousal support
- Unpaid student loans
- State and federal tax obligations
- Civil or criminal liabilities
- Bankruptcy orders
- Wage assignments associated with debts to creditors
An employer’s obligation
Regardless of the reason for the garnishment, you are legally required to help the court or agency collect these debts.
You should also keep in mind that it’s illegal to punish or retaliate against any employee with a single garnishment. You also cannot terminate an employee to avoid processing wage garnishment. However, laws vary from state to state on how employers can handle employees who are subject to multiple or repeated garnishments.
Wage garnishments and payroll: what employers need to do
If you’re reading this, you’ve probably been through the first step in the garnishment process: receiving a notice that tells you about the order and provides you with important details like the amount to withhold, the reason for the garnishment, and where to send wages that are withheld. The order may also include a garnishment calculator to help you figure out how much to hold back, based on how much an employee earns. If an employee’s compensation includes any tips, commissions or bonuses, they should all typically be included in your calculations.
The amount you’ll be asked to withhold typically ranges from 15% to 50% of an employee’s net pay, depending on the type of obligation.
Garnishments may be required to start anywhere from five to 30 business days from the date of the notice, depending on the state and who is asking for money. State laws around wage garnishment vary greatly, so be sure to read the documents carefully, as they may also include an end date.
Helping your employee understand what’s going on
Your employee might say that they can’t afford to have their wages garnished or that you don’t have to withhold the payments. Unfortunately, as the employer, garnishing wages is not optional once you receive the order or demand.
Employees will usually be aware of garnishments that apply to them, but it’s a good idea to let them know — privately — that you have received an order to garnish their wages, and to answer any questions about the details contained in the order. Taking a minute to talk with them will help avoid any unnecessary friction when their paycheck is smaller than they expect it to be.
There are also some good resources that explain garnishments to employees, walk them through the process, and make clear that it’s something you have no control over as their employer.
How are wage garnishments calculated?
You will need to deduct the garnishment from the employee’s net pay (after you’ve deducted payroll taxes). For example, if your employee’s after-tax pay is $1,000 and they have a $200 wage garnishment, their paycheck will be reduced to $800.
The wage garnishment order will provide all of the details for where payments need to be sent. For example, child support will usually go to your state’s Child Support Enforcement Department. Remember to keep copies of all payments and correspondence related to the remitting of garnishments in case you need to provide it to your employee or answer any questions down the road.
Administrative fees for wage garnishment processing
Wage garnishments do add an administrative burden to your payroll process, so you may consider charging your employee an administrative fee for handling it. Each state has guidelines and limits on how much you may charge. Some states also offer reimbursement to employers that deal with wage garnishments. Consult with your state’s Department of Revenue or Department of Labor for specifics.
When does a wage garnishment end?
Wage garnishments typically end one of three ways:
- If the employee stops working for you, then you are no longer required to comply with the court order because there are no longer any wages to garnish. Upon the employee’s termination, you will need to notify the agency or organization that the employee no longer works for you. Again, remember to keep copies of all this correspondence for your records.
- A court order may also end upon a date that’s specified within the order itself (when the debt will be paid in full based on the payment amounts). You will need to keep track of these dates to ensure that you don’t withhold wages your employee is entitled to.
- An employee’s debt can be paid off or released through some other arrangement (like voluntary payments or a settlement). If this happens, you will receive a notice advising you to stop withholding, and you may resume paying your employee their full compensation.
Is there any way to make garnishments easier?
Many state and federal agencies have online payment platforms that make it pretty easy to make to remit and track garnishment payments. If you work with a payroll software company, you may find that there’s a built-in feature for payroll garnishment. The functionality varies by provider, but a number will let you automate garnishments once you’ve got things set up properly. You can also ask your accountant or bookkeeper to help deduct, remit, and track payments for you.
Wage garnishments may seem like a hassle, but it shouldn’t take too much work for most employers to handle their obligation — and help their employees get back on the right track.
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Erin Ellison is the former Content Marketing Manager for OnPay. She has more than 15 years of writing experience, is a former small business owner, and has managed payroll, scheduling, and HR for more than 75 employees. She lives and works in Atlanta.