Wage garnishment is when the government requires a portion of an employee’s paycheck to pay for debt or other mandatory payments that employee owes. In other words, when someone doesn’t pay a debt voluntarily, a portion of their wages can be garnished—or reduced from their paycheck.
A wage garnishment letter or order notifies you officially that a court or government agency is requiring you to withhold a chunk of an employee’s salary or wages until their debt is paid off.
Common reasons include failing to pay:
- Child support
- Unpaid taxes
- Student loans
- Medical bills
- Credit card debt
Here are the steps you should take if you get a wage garnishment notice for one of your employees:
- Read the documents thoroughly. The notice you receive will spell out exactly what your responsibilities are. That includes how much you need to withhold, when to start and end withholding (most are open-ended and you must garnish wages until you are notified to stop), and when and where to send the funds. It will also include a contact in case you have any questions. Don’t put this off—there are deadlines for taking action.
- Tell your employee. They should have been notified too, but check in to make sure they know money will be coming out of their paycheck. Keep in mind that wage garnishment can be embarrassing and stressful. Consider taking steps to maintain their privacy, and to provide counseling or other support to your employee to prevent the situation from taking a toll in the workplace.
- Respond to the notice. The notice may ask you to complete and return a form (usually a verification of employment) providing information about your business and employee. Return it by the date requested.
- Withhold and pay. Determine how much to withhold based on the garnishment order and federal and state laws. This can be tricky, so it’s best to have a CPA or a payroll provider that can handle garnishments for you. Send payments as the notice instructs (usually by the next scheduled payroll date after the order was received, and usually the payment is due within just a few days of the payday).
- Learn more about your rights and responsibilities. For example, state and federal laws prevent you from firing employees because their wages are being garnished, in most cases. Other laws govern the maximum amount you can withhold from each check, what to do if there are multiple garnishments, what to do if the employee is terminated, and other topics. The US Department of Labor has information about federal rules, but research wage garnishment laws in your state as well.
Remember, never ignore a wage garnishment letter! If you don’t comply, you could be responsible for the debt, attorney’s fees, and even punitive damages.
Updated August 18, 2017
This article provides general information and shouldn’t be construed as tax advice. Since tax rules may change over time and can vary by location and industry, please consult a CPA or tax advisor for advice specific to your business.