Payroll Garnishments: 2023 Small Business Guide
This article is part of a larger series on How to Do Payroll.
Payroll garnishments are legal deductions from an employee’s wages, mandated by court orders or government agencies, to satisfy debts such as child support, tax levies, or student loans. Ensuring compliance with payroll garnishment rules is crucial, as failure to do so can lead to serious consequences, including fines and penalties.
Payroll garnishments can be daunting. This concise guide, designed for small businesses, navigates you through the types of garnishments, their complexities, and the corresponding regulations, to ensure compliance and efficiency when processing them.
Types of Payroll Garnishments
Each type of garnishment comes with its own set of compliance rules and considerations. It’s essential for small business owners to understand the differences between these garnishments to ensure proper handling and compliance.
The most common types of garnishments include:
- Child support garnishments: These garnishments are ordered by a court or state child support enforcement agency to provide financial support for an employee’s children. Typically, these garnishments take priority over other types of garnishments and have specific calculation rules.
For example, under federal law, the maximum withholding amount for child support can range from 50%–65% of the employee’s disposable earnings. This depends on factors like whether the employee supports other dependents and the age of the outstanding debt.
- Federal tax levies: Issued by the Internal Revenue Service (IRS), federal tax levies require employers to withhold a portion of an employee’s wages to pay outstanding tax debts. The exact amount withheld is determined by the IRS and depends on the employee’s filing status, number of dependents, and pay frequency.
Employers must carefully follow the instructions provided by the IRS when processing these garnishments, as failure to comply can cause significant penalties.
- State tax levies: Similar to federal tax levies, state tax levies are issued by state tax agencies to collect unpaid state taxes. The specific rules and procedures for state tax levies vary by state, so it’s important to consult your state’s tax agency for guidance on handling these garnishments.
- Student loan garnishments: If an employee has defaulted on their student loans, the Department of Education or a private loan holder can request garnishment of their wages. Under federal law, the maximum withholding amount for student loan garnishments is usually limited to 15% of the employee’s disposable earnings. However, some states may impose additional restrictions or requirements, so be sure to consult your state’s regulations.
- Creditor garnishments: Ordered by a court in cases where an employee owes money to a private creditor, these garnishments are subject to both federal and state limits on the maximum amount that can be withheld.
Under the Consumer Credit Protection Act (CCPA), the maximum garnishment amount for most debts is either 25% of an employee’s disposable earnings or the amount by which their disposable earnings exceed 30 times the federal minimum wage, whichever is lower. State laws may impose stricter limits or additional procedural requirements.
Compliance note: It’s crucial to follow the proper order of priority as established by federal and state regulations to ensure your payroll process is compliant. Generally, child support garnishments take precedence over other types of garnishments. Federal tax levies typically have priority over state tax levies, student loan garnishments, and creditor garnishments. In cases where multiple garnishments exceed the allowable limits under the CCPA, you’ll need to allocate the withheld amounts proportionally based on the legal priority of each garnishment.
While garnishments are involuntary and required by law to satisfy specific debts, other deductions, like taxes and retirement contributions, are standard payroll practices and are typically agreed upon between the employer and employee. Voluntary deductions, such as health insurance premiums or contributions to a 401(k) plan, are also distinct from garnishments, as they are based on the employee’s choice to participate in these benefits.
Basics of the Payroll Garnishment Process
You should integrate processing of any payroll garnishments into your payroll process. For more information on establishing the basics of handling payroll, check out our how to do payroll guide.
To help you navigate the payroll garnishment process, we’ve outlined a detailed step-by-step guide:
- Review the garnishment order: Upon receiving a garnishment order, carefully review it for accuracy and completeness. Ensure that the employee’s name, Social Security number, and other identifying information are correct. Verify that the order is from a legitimate source, such as a court or government agency.
If you have any questions at all, there will be contact information on the notice. Make sure you move swiftly, as you may be given limited time to start the garnishment or respond to let the notice provider know whether the employee no longer works for you.
- Notify the employee: Inform the affected employee about the garnishment order in writing, providing them with a copy of the order and any accompanying documents. Be prepared to answer questions and address concerns the employee may have.
If the employee has questions or thinks the order is incorrect, they need to contact the right court or agency. You cannot ignore the garnishment order simply by request of the employee.
- Determine the employee’s disposable earnings: Calculate the employee’s disposable earnings, which is their gross pay minus any legally required deductions (e.g., taxes, Social Security contributions, etc.). This figure will be used to determine the maximum garnishment amount according to federal and state regulations.
- Calculate the garnishment amount: Apply the relevant federal and state limits to the employee’s disposable earnings to determine the correct garnishment amount. Be sure to account for any specific rules or exemptions that may apply to the type of garnishment (e.g., child support, tax levies, etc.).
The notice should provide you with information on how to calculate the withholding amount or provide you with a specific dollar figure, based on your company’s payroll frequency.
- Apply the garnishment to the employee’s pay: Deduct the calculated garnishment amount from the employee’s wages before issuing their paycheck. Ensure that all other payroll deductions (e.g., taxes, retirement contributions, etc.) are applied correctly and in accordance with the law.
Before the first payroll run with the garnishment deductions, we recommend reminding the employee their next paycheck will be less.
- Remit the withheld funds: Send the withheld garnishment amount to the appropriate agency or creditor as specified in the garnishment order. Be sure to follow any specific remittance instructions and deadlines provided in the order. If you’re allowed to withhold an administrative fee for your company, usually just a few dollars, this is when you would do so.
- Update payroll records and maintain documentation: Update your payroll records to reflect the garnishment and keep detailed documentation of all actions taken. This includes copies of garnishment orders, correspondence with employees, calculations, and remittance records. Proper record-keeping is essential for demonstrating compliance with payroll garnishment rules and resolving any potential disputes.
- Monitor for changes or updates: Stay vigilant for any changes to the garnishment order, such as modifications, terminations, or new orders. Adjust your payroll processing accordingly and inform the affected employee of any changes.
Handling payroll garnishments can be a sensitive matter, as it involves discussing an employee’s personal financial situation. As an employer, it’s essential to approach these conversations with empathy, professionalism, and discretion.
Here are some best practices for communicating with employees about payroll garnishments.
- Initiating the conversation: Before providing written notice of the garnishment, it’s recommended to have an initial discussion with the employee in a private setting. This allows you to explain the situation, answer any questions, and address concerns before formalizing the process.
In today’s remote workplace environment, if you and the employee are not in the same location, you can have this conversation over video chat. However, ensure that it’s done in a timely manner, as you’re limited in the time you have before you must begin deductions.
- Providing written notice: After discussing the garnishment with the employee, follow up with a written notice that includes a copy of the garnishment order and any accompanying documents. The written notice should clearly explain the garnishment process, your obligations as an employer, and the impact on the employee’s pay. Maintaining a record of this written communication is essential for demonstrating compliance with garnishment regulations.
- Addressing employee concerns or questions: Encourage the employee to ask questions and voice any concerns they may have. Be prepared to provide accurate information about the garnishment process and direct the employee to relevant resources or agencies for additional support. Remain empathetic and understanding in your responses, acknowledging the potential stress and anxiety the garnishment may cause the employee.
- Handling requests to ignore the garnishment: If an employee asks you to disregard the garnishment order, it’s crucial to explain that you’re legally obligated to comply and that failure to do so could result in penalties for both the employee and the business. Encourage the employee to seek legal advice or contact the issuing agency or court if they believe the garnishment is incorrect or unjustified.
- Protecting employee privacy: To maintain trust and protect the employee’s privacy, keep all discussions and written communications about the garnishment confidential. Only share information about the garnishment with those who have a legitimate need to know, such as payroll staff or supervisors directly involved in the process. Avoid discussing the garnishment in public areas or with other employees.
To stop garnishment withholding once the debt has been fulfilled, you’ll need to follow these steps:
- Receive an order or notice: Wait for an official order or notice from the issuing court or agency indicating that the debt has been satisfied or the garnishment has been terminated. You cannot terminate garnishment withholdings based on information from your employee alone.
- Review the order or notice: Carefully review the order or notice to ensure it’s legitimate and contains accurate information about the employee and the garnishment. Also, ensure that the total amount received by the agency matches the total amount deducted as indicated in your payroll records.
- Update your payroll process: Once you’ve confirmed the validity of the order or notice, update your payroll process to cease withholding the garnishment amount from the employee’s wages. If you fail to timely end the garnishment and additional amounts are withheld, your business could be liable to your employee for repayment, plus penalties.
- Notify the employee: Inform the affected employee in writing that the garnishment has been fulfilled or terminated and that their wages will no longer be withheld.
- Update your records: Document the receipt of the order or notice, any communications with the employee, and the changes made to your payroll process as a result of the garnishment termination.
Legal Regulations on Payroll Garnishments
As a small business owner, it’s essential to be aware of the federal and state regulations governing payroll garnishments. These regulations dictate how you must handle garnishments, ensuring that both your employees’ rights and your business’s legal obligations are met. Failure to comply with these regulations can result in fines, penalties, and even liability for the full amount of the garnishment if errors are made.
Federal Regulations
At the federal level, the primary regulation governing wage garnishments is the Consumer Credit Protection Act (CCPA). The CCPA establishes limits on the amount that can be garnished from an employee’s wages, based on their disposable earnings (i.e., the amount remaining after legally required deductions such as taxes). Under the CCPA, the maximum garnishment amount for most debts is either 25% of an employee’s disposable earnings or the amount by which their disposable earnings exceed 30 times the federal minimum wage, whichever is lower.
However, some garnishments, such as child support and tax levies, have different limits under federal law. For instance, child support garnishments can be as high as 50%–65% of an employee’s disposable earnings, depending on factors like whether the employee supports other dependents and the age of the outstanding debt.
State Regulations
Besides federal regulations, each state has its own laws governing payroll garnishments. These state-specific regulations can vary widely, with some states imposing stricter limits on the amount that can be garnished, while others may have additional procedural requirements for employers.
As a small business owner, it’s crucial to familiarize yourself with the garnishment laws in your state as well as any other states in which you have remote or in-office employees. Note that some states provide additional protections for employees.
Here is a state-by-state breakdown:
Allowable Garnishment Amount: Federal limits, except that the employee must take home at least $217.50 per week
Employer Fee: $2 per month, child support only
Employee Protections Beyond Federal Law: Cannot terminate employee because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Contempt
Allowable Garnishment Amount: Maximum amount is 25% of disposable weekly income. No garnishment allowed if weekly net income is $350 or less.
Employer Fee: $5 per payment
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $1,000 fine, plus restitution to any employee disciplined, terminated, or not hired because of garnishment
Allowable Garnishment Amount: Federal limits
Employer Fee: $1 per pay period or $4 per month
Employee Protections Beyond Federal Law: Employers may ask new hires about existing garnishment orders, but may not make employment decision, or terminate existing employee, because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Contempt, plus fines
Allowable Garnishment Amount: Federal limits
Employer Fee: $2.50 per pay period
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Contempt, plus fines
Allowable Garnishment Amount: The lesser of 25% of an employee’s disposable weekly earnings or 50% of the amount by which the weekly disposable earnings exceed 40 times the present California minimum wage
Employer Fee: $1.50 per payment
Employee Protections Beyond Federal Law: Employee cannot be terminated for garnishment or proposed garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Contempt, plus payments not made, with interest
Allowable Garnishment Amount: Federal limites
Employer Fee: $5 per month for child support only
Employee Protections Beyond Federal Law: Cannot be terminated because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Contempt, plus penalties
Allowable Garnishment Amount: Maximum amount is 25% of disposable net income or the amount by which the employee’s earnings exceed 40 times the federal minimum wage or the Connecticut minimum wage, whichever is less.
Employer Fee: Not allowed
Employee Protections Beyond Federal Law: Cannot discipline, suspend, or terminate because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $1,000 fine
Allowable Garnishment Amount: Federal limits
Employer Fee: Not allowed
Employee Protections Beyond Federal Law: Cannot terminate because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $1,000 fine or up to 90 days in jail for the first offense. Additional offenses of up to $5,000 or one year in jail.
Allowable Garnishment Amount: Maximum of 25% of the amount by which the employee’s weekly disposable income exceeds 40 times the D.C. minimum wage
Employer Fee: $2 per payment for child support only
Employee Protections Beyond Federal Law: Cannot terminate because of garnishment or threat of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $10,000 fine for each instance of adverse employment action
Allowable Garnishment Amount: Federal limits, unless the employee’s income is less than 30 times the federal minimum wage, then no garnishment is allowed.
Employer Fee: $5 for the first deduction, $2 per subsequent deduction
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $250 fine for first violation, $500 for each subsequent violation
Allowable Garnishment Amount: Federal limits
Employer Fee: $25 for first deduction, $3 for each subsequent deduction for child support only
Employee Protections Beyond Federal Law: Cannot terminate because of a child support garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: None
Allowable Garnishment Amount: 5% for the first $100 of monthly disposable income; 10% for the next $100; 25% on all disposable income over $200 per month
Employer Fee: $2 per deduction
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Criminal contempt
Allowable Garnishment Amount: Federal limits
Employer Fee: $5 per deduction for child support only
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Up to $300 fine for each violation, restitution to the employee, including reinstatement, double lost wages, and other damages.
Allowable Garnishment Amount: The lesser of 15% of gross wages or the amount of disposable income after deducting 45 times the present Illinois minimum wage.
Employer Fee: 2% of the entire amount withheld for general payroll garnishment, $5 per month for child support
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $200 fine plus restitution, including reinstatement. Any officer or employee who has control over withholding is personally liable for the total amount not paid or withheld.
Allowable Garnishment Amount: Federal limits
Employer Fee: $12 or 3% of the total amount withheld, whichever is greater (50% paid by employee and 50% paid by creditor), $2 per deduction for child support.
Employee Protections Beyond Federal Law: Cannot terminate because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: None
Allowable Garnishment Amount: The lesser of 25% of the employee’s weekly disposable income or the amount by which the employee’s weekly disposable earnings exceed 40 times the federal minimum wage.
Employer Fee: $2 per deduction for child support only
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: First failure to withhold is a misdemeanor—may include fees and penalties.
Allowable Garnishment Amount: Federal limits
Employer Fee: $5 per pay period or $10 per month, whichever is less
Employee Protections Beyond Federal Law: Cannot terminate because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $500 fine, and other relief
Allowable Garnishment Amount: Federal limits
Employer Fee: $1 per payment
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $500 fine or up to one year in jail, or both
Allowable Garnishment Amount: Federal limits
Employer Fee: $3 per pay period
Employee Protections Beyond Federal Law: Cannot be terminated or denied employment because of one garnishment. May be terminated for three or more garnishments for unrelated debts in a two-year period. Cannot be terminated if garnishment results from an accident or illness where the employee missed 10 or more consecutive working days.
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: If terminated, employee is entitled to reinstatement and back pay
Allowable Garnishment Amount: The lesser of 25% of the employee’s disposable income or the amount by which the employee’s disposable income is over 40 times the present state minimum wage.
Employer Fee: $1 per payment for general garnishment, child support garnishments set per order
Employee Protections Beyond Federal Law: Cannot terminate because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $100 fine for each missed withholding. If the employee is terminated, a $5,000 fine plus additional damages.
Allowable Garnishment Amount: The lesser of 25% of an employee’s weekly disposable income or the employee’s weekly disposable income less 30 times the Maryland minimum wage
Employer Fee: $2 per deduction for child support only
Employee Protections Beyond Federal Law: Cannot terminate employee for having one garnishment in a year
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $10,000 fine and up to one year in jail
Allowable Garnishment Amount: The greater of 15% of the employee’s gross wages or disposable income less than 50 times the present Massachusetts minimum wage.
Employer Fee: $1 per pay period
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $1,000 plus damages
Allowable Garnishment Amount: Federal limits
Employer Fee: $6 per garnishment
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: If terminated, the employee must be reinstated, and paid all lost wages and benefits.
Allowable Garnishment Amount: Federal limits
Employer Fee: $1 per payment, child support only
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: If terminated, the employee is entitled to reinstatement and back pay.
Allowable Garnishment Amount: Federal limits
Employer Fee: $2 per payment
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: None
Allowable Garnishment Amount: Federal limits
Employer Fee: 2% or $8 for general garnishment, whichever is greater. $6 per month for child support
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Company liable for missed payments. Also subject to a $500 fine.
Allowable Garnishment Amount: If weekly wages are less than $217.50, no garnishment is allowed. Weekly wages between $217.50 and $290, only amounts exceeding $217.50 can be garnished. For employee’s earning over $290 per week, 25%.
Employer Fee: $5 per month for child support only
Employee Protections Beyond Federal Law: Cannot terminate employee because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Up to $500 fine, employee reinstatement, and back pay.
Allowable Garnishment Amount: Federal limits
Employer Fee: $2.50 per month for child support only
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Company liable for missed payments. Also subject to a $500 fine, reinstatement, and back pay.
Allowable Garnishment Amount: The lesser of 25% of employee’s disposable income or the amount by which their disposable income exceeds the federal minimum wage.
Employer Fee: $3 per pay period, up to $12 per month for general garnishment. $3 per payment for child support.
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $1,000 fine per pay period, plus the entire missed withholding amount
Allowable Garnishment Amount: Federal limits
Employer Fee: $1 per payment
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $1,000 fine plus $100 fine per pay period where withholding is not done
Allowable Garnishment Amount: If an employee earns less than 250% of the federal poverty level, 10% of wages can be garnished. Over that, 25%.
Employer Fee: $1 per payment for child support only
Employee Protections Beyond Federal Law: Cannot discipline an employee because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: If terminated, the employee must be reinstated and paid all lost wages, plus damages.
Allowable Garnishment Amount: The lesser of 25% of the employee’s disposable income or the amount by which weekly disposable income exceeds 40 times the federal minimum wage.
Employer Fee: $1 per payment
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Company liable for the entire amount not withheld, plus reinstatement if terminated, and damages. Possible contempt of court.
Allowable Garnishment Amount: 10% of an employee’s gross wages or 25% of disposable income exceeding 30% of the federal minimum wage, whichever is less.
Employer Fee: Not allowed
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $500 fine for the first offense, $1,000 fine for each subsequent offense. If terminated, must rehire the employee and pay up to six weeks lost income.
Allowable Garnishment Amount: Federal limits
Employer Fee: $1 per payment
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: If terminated, employee may be rehired, receive lost income, costs, and attorney’s fees.
Allowable Garnishment Amount: The lesser of 25% of the employee’s weekly disposable income or the amount by which the income exceeds 40 times the federal minimum wage.
Employer Fee: Not allowed
Employee Protections Beyond Federal Law: Cannot terminate employee because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: If terminated, employee may be reinstated, and employer must pay double back pay. Possible contempt of court.
Allowable Garnishment Amount: Federal limits
Employer Fee: $3 per pay period for general garnishment. $2 or 1% of amount withheld for child support, whichever is greater
Employee Protections Beyond Federal Law: Cannot terminate an employee because of a single garnishment in a 12-month period
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Up to $200 fine and up to 30 days in jail
Allowable Garnishment Amount: Federal limits
Employer Fee: $5 per payment for child support, $10 for general garnishment
Employee Protections Beyond Federal Law: Cannot terminate employee because of garnishment, unless employee has two or more garnishments in one year
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Company must pay lost wages, $200 fine, full amount not withheld, and must rehire the employee, if terminated.
Allowable Garnishment Amount: Federal limits
Employer Fee: $5 per month for child support only
Employee Protections Beyond Federal Law: Cannot terminate employee because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $250 fine plus all amounts not withheld. If terminated, may rehire employee, pay back pay, punitive damages, $200 fine, and attorney’s fees.
Allowable Garnishment Amount: Back rent, federal tax, state tax are limited to 10%. Student loans, 15%. Child support, 60%.
Employer Fee: 2% of amount withheld per payment
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $1,000 fine, jail, and contempt
Allowable Garnishment Amount: The greater of 25% of the employee’s disposable income or 30 times the federal minimum wage.
Employer Fee: $5 per general garnishment order, $2 per child support payment
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Company is liable for full amount not withheld, plus interest. $100 fine for disciplining employee and, if terminated, reinstatement with back pay.
Allowable Garnishment Amount: Federal limits, except that no garnishments are allowed for credit card debt, other credit purchases, rent, or lease.
Employer Fee: $3 per payment for child support only
Employee Protections Beyond Federal Law: Cannot terminate employee because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $500 fine for disciplining, terminating, or refusing to hire
Allowable Garnishment Amount: The greater of 20% of the employee’s weekly disposable income or 40 times the federal minimum wage
Employer Fee: $15 per garnishment order
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on a child support garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: For violating employee rights, company may be guilty of a petty offense and subject to fines.
Allowable Garnishment Amount: The greater of 25% of the employee’s weekly disposable income or 30 times the federal minimum wage.
Employer Fee: 5% of amount withheld, up to $5 per month, for child support and alimony only
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire based on a child support or alimony garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $50 fine and up to 30 days in jail
Allowable Garnishment Amount: Federal limits
Employer Fee: Actual cost or up to $10 per month, whichever is less, for general garnishment. $10 per month for child support, and $5 per month for alimony.
Employee Protections Beyond Federal Law: Cannot discipline, terminate, or refuse to hire because of child support or alimony garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: If terminated, employee must be reinstated with full benefits, back pay, and possible damages. $200 fine for each instance of failing to withhold garnishment.
Allowable Garnishment Amount: The greater of 25% of the employee’s weekly disposable income or 30 times the federal minimum wage.
Employer Fee: $10 for single garnishment, $25 for ongoing, one time
Employee Protections Beyond Federal Law: Cannot terminate or discipline an employee because of a child support garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $1,000 fine plus interest and damages to employee
Allowable Garnishment Amount: The lesser of 25% of the employee’s weekly disposable income (15% for credit card debt) or 30 times the federal minimum wage (40 times for credit card debt)
Employer Fee: $5 per month for child support only
Employee Protections Beyond Federal Law: Cannot terminate employee because of garnishment. Any termination of an employee within 60 days of company receiving a garnishment notice or order is presumed to violate Vermont law.
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: If terminated, must reinstate the employee with back pay and damages. Company is liable for any amounts not withheld plus interests and costs.
Allowable Garnishment Amount: The greater of 25% of employee’s weekly disposable income or 40 times the federal minimum wage.
Employer Fee: $10 for each general garnishment, $5 per child support payment
Employee Protections Beyond Federal Law: Cannot terminate employee for child support garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $1,000 for each instance of violating an employee’s rights
Allowable Garnishment Amount: The lesser of 25% of the employee’s weekly disposable income or 30 times the federal minimum wage.
Employer Fee: $10 for first payment, $1 for each subsequent for child support and alimony. $15 for first payment, $1 for subsequent for Department of Social and Health Services.
Employee Protections Beyond Federal Law: Cannot terminate an employee for garnishment unless company has received three or more separate and unrelated garnishments in a 12-month period
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: $2,500 fine per violation, plus double lost wages to employee and possible reinstate, if terminated. Company is liable for full amount not withheld plus costs.
Allowable Garnishment Amount: The lesser of 20% of the employee’s weekly disposable income or 30 times the federal minimum wage.
Employer Fee: $1 per payment for child support only
Employee Protections Beyond Federal Law: Cannot take any adverse action against employee because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: Up to $1,000 fine per violation of employee’s rights
Allowable Garnishment Amount: The greater of 20% of the employee’s weekly disposable income or 30 times the federal minimum wage
Employer Fee: $3 per payment for child support or alimony only
Employee Protections Beyond Federal Law: Cannot take any adverse action against employee because of garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: If terminated, employee may seek reinstatement, back pay, back benefits, restoration of seniority, and attorney’s fees. Company is liable for a $500 fine for each child support payment not withheld.
Allowable Garnishment Amount: Federal limits
Employer Fee: $5 per payment for child support only
Employee Protections Beyond Federal Law: Cannot terminate employee for garnishment
Employer Penalties for Failure to Comply or for Taking Adverse Employment Action: If terminated, the employee may seek reinstatement, 30 days back pay, and costs. $200 fine for each failure to withhold.
The impact of garnishments on your standard payroll process can be significant, as it requires careful attention to detail and accurate calculations. Ensuring the proper amount is withheld and remitted to the appropriate agency or creditor is critical, as any errors could result in your business being held liable for the outstanding debt. Mishandling garnishments can lead to fines and penalties, further emphasizing the importance of strict compliance with all applicable regulations.
Compliance Tip: You cannot terminate an employee because their wages are being garnished in any state. You may terminate an employee whose wages are being garnished if you have a legitimate business reason for doing so, like poor performance.
Importance of Recordkeeping & Reporting
We covered this briefly above, but it’s worth spending more time discussing this. Because a garnishment can also upend your typical payroll process, it’s important to keep your records clean and accessible to those who need the information.
Here are some key points to consider when managing records related to payroll garnishments:
- Garnishment order: Keep a copy of the original garnishment order and any accompanying documents in a secure location. This includes court orders, notices from government agencies, or other official communications related to the garnishment.
- Amounts withheld: Maintain a record of all amounts withheld from the employee’s wages for each pay period, including the date of each deduction and the specific garnishment type (e.g., child support, tax levy, etc.). Your payroll provider should have a report available that you can run during each payroll period.
- Remittance records: Document the dates and amounts of all remittances made to the appropriate agency or creditor, as well as any confirmation numbers or correspondence related to the payments.
- Administrative fees: If your state allows employers to retain a small administrative fee for processing garnishments, keep a record of these fees and ensure they’re accurately reflected in your payroll records.
- Employee communications: Retain copies of all written communications with the employee regarding the garnishment, including the initial written notice and any subsequent updates or changes.
Regularly reviewing and updating your garnishment records is essential for staying organized and prepared for any potential audits, inquiries, or disputes.
Bottom Line
Managing payroll garnishments is crucial for small business owners. Stay informed about regulations, accurately calculate and withhold garnishment amounts, communicate empathetically with employees, and maintain detailed records to ensure compliance and avoid penalties. Your diligence benefits both your employees and their creditors, fostering a fair and transparent process. By adhering to the guidance in this article, you’ll confidently handle garnishments and maintain an efficient payroll system.
