The term ‘garnish’ essentially implies decorating the food with a small amount of other food. Garnishing wages is not very different from this definition. however, the only difference is that garnished food looks appealing, but the same cannot be said for garnished wages. let’s know why!
Generally speaking, when you deduct a portion of your employees’ wages to pay your debts, you are garnishing their wages. this is legally permissible and we will learn more about wage garnishment in detail. Upon receipt of the wage garnishment court order, the company’s payroll department must initiate action in the direction of garnishing employee wages.
This is what we have lined up for you in this article:
- what is wage garnishment?
- types of wage garnishment
- How does wage garnishment work?
- termination of wage garnishment
- How do I know if my employees’ wages should be garnished?
- What wages should I garnish?
- Is there a limit to the amount that can be garnished?
- As an employer, what is my responsibility?
- what should my employee do?
- frequently asked questions
- how can deskera help you?
- key points
- child support
- default on a student loan
- unpaid taxes
- defaults to a credit card
what is wage garnishment?
Court-ordered wage garnishment is a garnishment from an employee’s salary or paycheck for the purpose of paying their debts. all salaried employees are subject to wage garnishment. wages, bonuses, and even retirement plan income can be garnished if the person has a debt.
However, federal regulations prescribe that income in the form of tips is not subject to wage garnishment.
Employers are legally required to withhold an employee’s wages and make direct payments to the designated agency or creditor when served with a garnishment order.
Wage garnishment can be triggered by any of the following:
A wage assignment chosen by the employee, such as health insurance or pre-tax benefit programs, is not a wage garnishment. When receiving notice of a wage garnishment, it is important to remember that the garnishment must be processed within a reasonable time. Failure to do so may result in sanctions for the employer.
types of wage garnishment
Wage garnishment can be done for four different types of debt. they are arranged in order of ease of collection. Whenever the federal government collects debt, it always takes precedence over state law liens. similarly, child support will be garnished before credit card payments if an employee owes both.
here is a table that sheds more light on the types of wage garnishment:
This must always be paid first under federal law. in addition, the law mandates the automatic garnishment of alimony, child support, and other court-ordered family support paydays.
IRS tax debts and government-backed federal loans fall into this wage garnishment category.
Employers can garnish wages for state tax debts. Before state garnishment laws can be implemented, wages, child support debts, and federal debts must first be settled.
credit card debt
The right to garnish wages may be available to private organizations after paying off federal and state debts.
how does wage garnishment work?
The wage garnishment proceeding is an elaborate process involving numerous steps. this section takes you deeper into this process.
- wage garnishment begins when a creditor files an “application for wage garnishment,” which is form dc/cv65, with the court
- After the petition is filed, a court clerk or judge signs the document, thereby establishing the garnishment order. as part of the court order, the garnishee is required to keep any property of the debtor that the garnishee owns at the time the order is filed
- To file a wage garnishment petition, the creditor must pay court fees. The garnishee may also have to pay fees for serving the writ of garnishment. The garnishee must receive the garnishment order from the creditor by certified mail, restricted delivery, private process, or bailiff/bailiff
- In addition to interest, court costs and fees can also be added to most judgments a debtor owes a creditor. therefore, communication between the garnishee and the creditor is important to ensure that the correct amount is paid to the creditor
- Garnishees must respond to the order within 30 days of receiving service.
- The garnishee is required to disclose whether the debtor is employed, the amount of wages received, and any wage garnishments that have already occurred
- Garnishees who do not respond to the garnishment order will likely be held in contempt of court
- Once the garnishee receives the court order, they must calculate the amount of the debtor’s garnishable wages per pay period. in such a case, the wages must be withheld until the judgment is served or the garnishee is ordered to stop withholding. The garnishee must inform the creditor, or his attorney, of the total wages garnished when the debtor’s payment period ends
- Another lien should be handled in exactly the same way, but a subsequent lien should not be paid until the first lien is paid in full. the next garnishment will start once the first garnishment is fully paid. if there are multiple liens, then the first lien must be satisfied in full before subsequent liens are paid
- The creditor who receives wage garnishments must request payment of the accrued interest in the judgment.
- Next, the debtor has assessed attorney fees and court costs, then the principal amount of the judgment.
- During each pay period, the garnishee must give the debtor a written description of the amount taken and the method used to determine it. this information can be obtained from the paycheck
- when the creditor receives the payment from the garnishee within 15 days following the end of the month, he must send him an account statement detailing the payments received
- Creditors must keep copies of these statements for 90 days after the garnishment ends, but are not required to file them with the court
- these statements may be examined by the court or any party at any time you wish to see them
termination of wage garnishment
A wage garnishment ends 90 days after an employee’s termination unless the garnishee rehires the employee during that time. it is the duty of the garnishee to inform the court and all parties if the debtor is fired or stops working.
- if wages are garnished, the garnishee is not allowed to fire or lay off the debtor
- Under federal law, a garnishment can only be equal to 25 percent of a debtor’s disposable income. disposable income is the amount of present earnings after legally required deductions
- examples of these include federal or state taxes, unemployment, social security, health insurance
- social security tax
- state income tax
- medicare tax and additional medicare tax
- federal income tax
- local income tax
- 25 percent of disposable income
- the amount after finding the difference between disposable income and 30 times the minimum hourly wage
- employee may receive 50% of disposable income if supporting unprotected spouse or child
- if the employee has no current dependents other than those listed on the court order, 60% of disposable income may be paid
number of dependents
is in garnishment proceedings for child or spousal support; in addition, they are supporting another child or spouse
the maximum garnishment can be 50%
you are subject to a spousal or child support lien, but you are not supporting another spouse or child
the maximum garnishment can be 60%
Support payments overdue for more than 12 weeks
an additional 5% may be garnished
As an employer, what is my responsibility?
As an employer of the company, upon receiving the court order, you must follow the following steps:
step 1: inform the employee
Once you receive the wage garnishment order, the first thing you should do is immediately notify your employee of the matter in writing. the order will contain the details of the garnishment. it may also include a form based on the type of garnishment ordered by the court.
Step 2: Notify the human resources department of the payroll team
At this point, human resources departments should be notified so that the wage garnishment process can begin. There may be times when the employee is unwilling to comply with sending payments to creditors. this would be called a breach of wage garnishment rules.
The payroll department must ensure that the amount due is sent to creditors in such a situation. A company that follows these steps will not face any legal consequences for not responding to the request.
Step 3: Drafting the Wage Garnishment Letter
In addition, an employer may also write a letter outlining the wage garnishment order. The letter also contains information about the duration during which the wage garnishment will occur.
step 4: stop the garnishment procedure
once the employee’s debt is settled, now is the time for the proceeding to stop the garnishment. however, this depends on the type of garnishment.
Employers are sent 668-d forms for federal liens. in the case of alimony, they may receive correspondence from the state. state officials will send the employer a notice or letter, and creditors will send employers a “Notice of Termination/Release of Wage Garnishment Order.”
what should my employee do?
When employees receive a wage garnishment order, they can choose to contest the garnishments or discuss/negotiate with their creditors. Also, if your employee needs more information about the Social Security garnishment rules that apply to him, he should contact his creditors.
Other than these, if you have concerns about things like the following, they should be discussed between the employee and the creditor:
- make a different plan
- check garnishment balance
- any other relevant queries
- A garnishee who violates the law may be cited for contempt of court and charged attorney fees and court costs
- creditors who do not follow the law can have their garnishments dismissed and attorneys’ fees charged
- Generally speaking, when you deduct a portion of your employees’ wages to pay your debts, you are garnishing their wages. this is legally allowed and we will learn more about wage garnishment in detail
- Court-ordered wage garnishment is a withholding of an employee’s salary or paycheck for the purpose of paying their debts
- all salaried employees are subject to wage garnishment. wages, bonuses, and even retirement plan income can be garnished if you have debt
- tipped income is not subject to wage garnishment
- alimony, child support, student loan default are some of the items that can trigger wage garnishment
- There are four types of debt for which wages can be garnished. they are arranged in order of ease of collection: child support, federal debt, state debt, credit card debt
- The range for wage garnishment is typically between 15 percent of disposable income and 65 percent of disposable income. (15% for student loans and 65% for child support)
- A garnishee who violates the law may be cited for contempt of court and charged attorney’s fees and court costs
- creditors who do not follow the law can have their garnishments dismissed and attorneys’ fees charged
- The laws governing wage garnishment vary from state to state; therefore, it is recommended to consult with a certified public accountant for the current list of garnishment regulations and guidelines
- wage garnishment cannot be a reason to terminate an employee
- Wage garnishments are court orders, so employers must obey them. employers have seven days from receipt of a garnishment order to acknowledge and respond
Despite this, if there is any other question that you as an employer would like to know about, you can contact your local Wage and Hour Division office.
as the creditors created the order and therefore it does not involve you in any way. consequently, all discussions and negotiations must occur between the employee and the creditor.
frequently asked questions
These are some of the most frequently asked questions:
p. Are there sanctions for non-compliance?
a: Like any other rule that has penalties for non-compliance, so does wage garnishment. there could be violations by the lienholder or creditors.
Q: Are there any state laws I must follow?
a: yes. Laws governing wage garnishment vary from state to state. certain states have restrictions and protections and others do not. Because of this, it’s crucial that you hire a CPA who is familiar with wage garnishment guidelines in your state.
Q: Is it possible to fire an employee whose wages are garnished?
a: Wage garnishment cannot be a reason to terminate an employee. By contrast, the CCPA does not cover or protect employees who have more than two wage garnishment orders. special instances can be consulted and discussed with an attorney before proceeding.
Q4: Is an employer required to honor a garnishment?
a: Wage garnishments are court orders, so employers must obey them. employers have seven days from receipt of a garnishment order to acknowledge and respond.
However, it is not necessary to comply with a lien in all cases. You can challenge a court order of garnishment if you receive it for a former employee by using the legal response form included with it.
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When a debtor earns close to the minimum wage, they must keep at least 30 times the federal minimum wage. for the collection of overdue food, this rule does not necessarily apply.
How do I know if my employees’ wages should be garnished?
A wage garnishment letter will be sent to you. A court order, also known as a writ, is required for wage garnishment. therefore, wage garnishment is a legal proceeding. The court order or IRS lien will notify you if the wages need to be garnished. Courts and government agencies will order you to withhold a portion of an employee’s salary or wages until the debt is paid.
The letter will outline your responsibilities in detail. it also explains when and where you should send the funds and how much you should hold and when to start and end the hold.
Generally, you must begin garnishing an employee’s wages within seven days of receiving notice that orders are being obtained. A lien generally lasts until it is given notice to stop. therefore, you must garnish wages until you are notified to stop garnishing. in case you need more information, the letter will include a contact through which you can get more information or clarification.
what wages should I garnish?
Under Title III of the federal Consumer Credit Protection Act, or CCPA, wage garnishments must be based on an employee’s disposable income.
what is disposable income? Disposable income is the total compensation an employee receives less any required deductions, including federal, state, and local taxes. It generally includes salaries, bonuses, and commissions, as well as retirement income and pensions.
the legal deductions will include the following:
Is there a limit to the amount that can be garnished?
In most cases, the amount of wages garnished varies by garnishment. the range is usually between 15 percent of disposable income and 65 percent of disposable income. (15% for student loans and 65% for child support).
Employers must comply with state laws requiring lesser wage garnishment in states that have different laws than the federal wage garnishment laws. Regardless of debt levels, employees can rest assured that they will always have enough from their paycheck to meet their daily needs.
If wages are not used to support an individual or family, the limit is the lesser of these two amounts:
Under Title III, garnishments of wages used for the support of an individual or family may only be made for the following amount per pay period:
Some garnishment orders, such as bankruptcy orders or tax debts, may not be affected by the restrictions.
Here is a table showing the employee’s financial situation and the corresponding wage garnishment that may apply:
wages garnishment rule applied
earn up to $217.50
Wage garnishment cannot be done regardless of what is stated in the order
wages range from $217.50 to $290 per week
$217.50 per week can be garnished
makes over $290 a week and also has credit card debt, medical bills, and other consumer debt
a maximum of 25% can be seized
have federal student loans
a maximum of 15% can be seized
has lien for federal tax debt
the amount seized depends on: