This blog was written by Lindsay Larsen, Wage Withholding Specialist at Helpside. Lindsay has more than five years of experience managing complicated employee garnishment situations for clients of Helpside.
A wage garnishment is an attempt to collect on a debt through an employee’s pay. Some examples include child support, creditors, bankruptcy orders, student loans, emergency loans, tax levies, and other debts. Wage garnishments can be complicated and there are serious consequences for errors. Here is a guide for small businesses who are dealing with employee wage garnishments:
Processing Employee Garnishments
Generally the wage garnishment process starts with an order or notice from a court or government agency. Immediately after receiving that you, as an employer, must do two things. First, you need to reply confirming that you received the garnishment and you intend to comply. Then you need to begin taking the deduction from the employee’s paycheck and submitting payments. The garnishment will include details for compliance. If you do not comply with an employee garnishment order, as an employer, you can face fines and other legal repercussions.
Handling Multiple Garnishments
You may run into a situation where you have an employee who is subject to multiple garnishment orders. Make sure you understand how these garnishments interact with one another. For example, typically no more than 25% of an employee’s disposable income (65% for child support) can be applied to garnishments. Disposable income is defined as an employee’s wage after taxes. IRS tax levy garnishments do not have a maximum percentage and often garnish the majority of an employee’s wages until completed.
If you receive another garnishment order after an employee is paying the maximum, you will usually wait until one is complete before starting the other. One exception to this is child support or tax related garnishments, which always take priority.
End of Garnishments
Garnishments often end when the debt is paid off or you, as an employer, receive a termination notice from the creditor or government agency. Sometimes a garnishment order will include the end date regardless of whether the debt is paid off. If any of these things happen, you must remove the deduction from the employee’s pay immediately.
While they can be an administrative burden for employers, employees with garnishments are protected from being disciplined or fired for a single garnishment order. Some states extend that protection to employees with multiple garnishment orders and others do not. It is important to understand the laws in your state if you are considering disciplining or terminating an employee for multiple garnishments.
Often companies that process payroll, like Helpside, can handle garnishment deductions for you. At Helpside, we have a team of experts who can help you stay in compliance. If you want to know more about how Helpside handles garnishments, contact us at firstname.lastname@example.org or send us your name and email using the form below and we will reach out.