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What You Need to Know About Payroll Garnishments

What You Need to Know About Payroll Garnishments


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Millions of wage garnishments are issued every year, but if you haven’t dealt with them before, they can be confusing. Keeping the following things in mind can help you meet your obligation as an employer.

What is a Payroll Garnishment?

A wage garnishment is a court-ordered process of deducting money from an employee’s compensation or wages so those funds can be paid to a creditor. Garnishments can be the result of unpaid debts, child support, student loans, personal loans or judgments from a court case.

How Am I Notified About a Garnishment?

You will receive a garnishment notice in the mail, not through email. You have to respond to a writ of garnishment even if it’s in error. Failing to comply could leave you on the hook for the entire amount of the debt.

Do Garnishment Laws Differ From State to State?

Yes, they do! States’ wage laws differ from each other and from federal law. It’s important to understand the rules of the states in which you operate, so you can accurately calculate garnishment amounts.

Is There a Limit to How Much an Employer is Allowed to Take for a Garnishment?

For ordinary garnishments—those not for support, bankruptcy or any state or federal tax—the weekly amount may not exceed the lesser or two figures: 25 percent of the employee’s disposable earnings, or the amount by which an employee’s disposable earnings are greater than 30 times the federal minimum wage.

When you receive a garnishment notice, the first garnishment must be paid within 10 days of receiving the notice.

Can I Terminate an Employee Who Has a Garnishment?

No, you can’t terminate employees because they have garnishments.

Do I Have to Tell the Employee There Is a Garnishment?

No, you aren’t obligated to tell an employee that you received a garnishment, but it’s still a good idea. Just be sure to do so privately because this could be an uncomfortable conversation for the employee.

What Does a Garnishment Include?

Garnishments are calculated on all earnings, including salary, bonuses, vacation pay and pensions.

When figuring disposable earnings, use the employee’s gross wages minus all mandatory deductions such as federal and state withholding, FICA and Medicare. In some states, health care deductions are not considered mandatory, so the garnishment is calculated without factoring in the health deduction.

How Long Do I Need to Continue the Garnishment?

You need to continue to pay it until you receive a release of order or the garnishment is paid in full. A good practice before you discontinue the garnishment is to call the attorney listed on the garnishment order and find out what the final payoff amount is. It’s important to get the final figure because there may be fees and interest that have accrued on the garnishment. The final payoff could be much different from the original garnishment amount.

What Are the Steps If an Employee Leaves Our Company?

Depending on the state in which you operate, there is a form you need to complete that goes to the attorney on the garnishment and the state. If an employee terminates his or her employment with you, it’s wise to have documentation showing how you’ve complied with the garnishment order. Documentation is your best friend!

Be sure to seek advice from an expert who can help you understand the requirements in each state to ensure you are following the rules.

Written by

Sean Dawson, CPA, is a shareholder with Mize Houser & Company, PA, a regional accounting, payroll and consulting firm with offices in Overland Park, Lawrence and Topeka. www.mizehouser.com

Categories: Finance

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