What is wage garnishment?
Wage garnishment is a legal process in which an employer withholds a portion of an employee’s earnings and sends it directly to a creditor, government agency, or court. It typically occurs when an employee has unpaid debts such as child support, tax debts, student loans, or court-ordered judgments.
For businesses using Homebase payroll, understanding wage garnishment laws ensures compliance with federal and state regulations while keeping payroll deductions accurate and hassle-free.
How wage garnishment works
When a court or government agency issues a wage garnishment order, employers must:
- Receive the garnishment notice – The order outlines how much should be withheld from the employee’s paycheck.
- Calculate the correct deduction – Federal and state laws set garnishment limits.
- Withhold wages as required – The deduction is taken out before the employee receives their paycheck.
- Send the withheld amount to the appropriate party – Payments must go to the designated creditor or agency.
- Continue withholding until the debt is paid – Garnishments remain in effect until the entire debt is satisfied or the court orders a change.
Employers must process garnishments accurately and on time to avoid penalties.
Types of wage garnishments employers should know
Employers may encounter different types of wage garnishments, including:
- Child support and alimony – Depending on the employee’s financial situation, up to 50-65% of disposable income may be withheld.
- Federal and state tax levies – The IRS or state agencies can garnish wages for unpaid taxes.
- Student loan garnishments – Federal student loan agencies can garnish up to 15% of disposable income without a court order.
- Court-ordered debt collections – Creditors can request garnishment for unpaid loans, medical bills, or credit card debt.
- Bankruptcy wage garnishments – Chapter 13 bankruptcy may require employers to deduct repayment amounts directly from wages.
How much of an employee’s wages can be garnished
Federal law limits how much can be garnished from an employee’s paycheck. The maximum amount depends on the type of debt:
- Child support & alimony – Up to 50-65% of disposable earnings.
- Federal student loans – Up to 15% of disposable earnings.
- Tax levies – Varies based on exemptions and dependents.
- Consumer debts – Generally up to 25% of disposable income or exceeding 30 times the federal minimum wage.
State laws may impose stricter limits, so employers should stay informed about local regulations.
Employer responsibilities for wage garnishment
Employers must comply with garnishment orders by:
- Processing garnishments promptly to avoid legal consequences.
- Ensuring compliance with federal and state wage limits.
- Maintaining accurate payroll records for garnished wages and payments sent to creditors.
- Protecting employees from wrongful termination – The Consumer Credit Protection Act (CCPA) prohibits firing employees over a single wage garnishment.
Manually handling garnishments can be complex, but Homebase payroll automates the process, helping businesses stay compliant while reducing administrative work.
How Homebase makes wage garnishment easier
Managing wage garnishments can be time-consuming, but Homebase payroll simplifies the process by:
- Automatically calculating and deducting garnishments based on legal requirements.
- Ensuring compliance with federal and state regulations.
- Processing payments to creditors and agencies accurately.
- Keeping detailed payroll records for tracking deductions.
Reduce payroll complexity and ensure compliance—get started with Homebase today.