Don’t Let Garnishments Get You Down: What You Need to Know to Stay Ahead
The last thing any employer, or employee for that matter, wants to deal with is an order for wage garnishments. Handling payroll is already labor-intensive enough without the added calculations of personal debts coming out of your employees’ paychecks – not to mention the discomfort of being involved in the aspects of your employees’ lives that most employers would typically rather stay out of. But when those withholding orders arrive, it is your responsibility as an employer to comply.
Read on for what you need to know to keep from being bogged down by the additional requirements these orders will place upon your payroll system.
Understanding Wage Garnishments
People often think of spousal and child support payments when they hear about wage garnishments, but those aren’t the only reasons you may receive a withholding order. Bankruptcies, back taxes and personal and government debts can also be subject to wage garnishments. Typically these garnishments will arrive by court order and they are always regulated by Title III of the Consumer Credit Protection Act.
How Much Can be Withheld?
On an Earnings Withholding Order for Taxes (EWOT) and an Earnings Withholding Order (EWO), the maximum amount that can be withheld is 25 percent of an employee’s disposable earnings after legal deductions such as Social Security, Taxes and Medicare. If an employee makes less than 30 times the federal minimum wage per week, no wage garnishments can be applied at all. When an employee makes just above that mark, the lesser of 25 percent or the amount over 30 times the federal minimum wage per week can be garnished.
For Spousal or Child Support withholdings, the maximum amount can be up to 50 percent of those same disposable earnings if the employee is supporting another child and up to 60 percent if they are not. There can also be an additional 5 percent allowed when support payments are more than 12 weeks in arrears.
Prioritizing Multiple Orders
When you are presented with multiple withholding orders for the same employee, priority is given first to court ordered garnishments (what you would expect to see with spousal or child support), then to EWOTs and finally to EWOs. If the spousal or child support order is for less than 25 percent of the employee’s earnings, then the remaining amount up to 25 percent of the disposable earnings can be applied to the additional orders. When the spousal or child support order is for more than 25 percent of that disposable income, EWOTs and EWOs are no longer in effect.
When Employees Protest
No employee wants to hear that their wages are being garnished, but in most cases – you would hope they would have at least known this was coming. If an employee comes to you protesting the validity of an order, however, you should direct him or her to the issuing court or agency of the order. It is not your responsibility as an employer to hear the facts of the case or even to lend a supportive ear – you must simply comply with the legal notice until, if and when, you are notified by the issuing agency or court directly to disregard the order.
As you can probably tell, these issues can often get murky and complicated. If you are confused about the details of a specific wage garnishment order, you can contact the court or agency responsible for submitting that order.
It is also always helpful to have an HR Professional or Payroll Provider at your disposal who is familiar with these issues and can help you to navigate the many complex aspects of wage garnishments.