What Is Wage Garnishment? An HR Pro's Guide for Tough Conversations

As an HR professional, you’re well aware that wage garnishment isn’t a pleasant topic to cover. After all, it’s never easy to deliver bad news. As for your employee, discussing personal financial matters can feel intrusive at best. But it’s a conversation employers have had to have with hundreds of thousands of US workers and an issue that can affect company morale.

Workplace stress and burnout don’t just compound at the office—they’re often intensified by outside issues. In a 2023 Morgan Stanley State of the Workplace Study, 66% of employees say financial stress affects both their work and personal lives, encouraging HR to take notice and implement financial wellness programs to support their workforce during times of need.

When it comes to garnishment, your employee is probably well aware of the issue and may already feel tense about their situation. But leading with empathy, resources, and a well-informed perspective can facilitate a productive, compassionate conversation that’s less likely to end on a negative note.

At BambooHR, we’re trusted by business owners and administrators to take the hassle out of payroll with our all-in-one platform—we can even file and remit garnishment payments on your company’s behalf. In this article, we’ll break down how the wage garnishment process works and some key things to think about before sitting down with an employee.

What Is Wage Garnishment?

Wage garnishment is a court-approved mandate that requires an employer to withhold some of an employee’s paycheck to help repay an outstanding debt. In this situation, you must continue to deduct earnings until the employee’s balance is paid in full.

5 Most Common Reasons for Wage Garnishment

Covered by the Consumer Credit Protection Act (CCPA), wage garnishment is usually ordered for past-due debts but can apply to other circumstances. Five of the most common reasons for wage garnishment include:

• Unsettled consumer debt (e.g., credit cards, personal loans)
• Defaulted federal student loans
• Past-due medical bills
• Unpaid spousal/child support
• Outstanding tax levies

How Do Garnishments Work?

Wage garnishment doesn’t happen right away—it’s usually initiated as a last resort when the Internal Revenue Service (IRS) or a debt collector sees no other way to get a person to repay what they owe. They typically take legal action after repeated attempts to reach out to your employee, initiate a payment plan, or find another way to collect.

How Do I Know If an Employee’s Wages Should Be Garnished?

Garnishment begins with an official notice. The IRS, a federal student loan holder, or a child support agency may initiate the process directly. Alternatively, you may receive a court order called an “income withholding order” or “writ of garnishment” that outlines your responsibilities.

How Long Does an Employer Have to Respond to a Wage Garnishment?

Once you've received notice that an employee’s earnings are subject to garnishment, you’ll have to confirm receipt and start deducting wages within a set timeframe (e.g., after 30 days). The notice will let you know how to proceed and provide a contact for more information.

What Wages Can Be Garnished?

To a certain extent, the employee’s disposable earnings are subject to garnishment. This is the amount in their paycheck left after income taxes and other legally required deductions, such as:

• FICA (Social Security and Medicare taxes)
• State unemployment insurance
• Withholdings for employee retirement systems required by law

On the other hand, voluntary payroll deductions are subject to garnishment. This is the money that would otherwise go toward things like:

• Health insurance
• Life insurance
• Union dues
• Charities
• Elective retirement plans

After figuring out what counts as disposable earnings, the next step is calculating exactly how much you’re allowed to deduct.

How Are Payroll Garnishments Calculated?

In addition to the type of earnings that can be garnished, Title III of the CCPA also limits how much can be taken out of an employee’s paycheck per workweek or pay period. For ordinary garnishments, the amount remitted is the lesser of these two options:

• 25% of the employee’s weekly disposable income
• Any amount over 30 times the applicable minimum wage (i.e., federal, state, or local)

Along with deductions for unpaid state/federal taxes, garnishments for other debts are calculated differently:

• Spousal/child support: Up to 60% of an employee’s disposable earnings (or up to 50% if they’re supporting a spouse or child), plus 5% extra if payments are over 12 weeks late
• Federal student loans: Up to 15% of an employee’s disposable earnings

Payroll Garnishment Examples

Let’s say $7.25 is the federal minimum wage, the employee is paid weekly, and you need to calculate garnishments for an outstanding auto loan:

1. If the employee receives $217.50 or less in disposable earnings, you can’t garnish their wages because they don’t meet the minimum threshold.
2. If the employee receives between $217.50 and $290.00 in disposable earnings, the amount above $217.50 is taken.
3. If the employee receives $290 or more in disposable earnings, you can garnish up to 25%.

Additional conditions may apply to your employee’s circumstances. The US Department of Labor (DOL) provides more information.

Wage Garnishment Laws by State

State garnishment law significantly varies. If it differs from what’s in the CCPA, you must apply the option that results in the lowest amount of wages taken.

State law may also offer other protections for your company and its employees. For instance, garnishment is prohibited in Texas with a few exceptions. In California, specific amounts depend on the minimum wage where the employee works. In some states, employers can collect a small fee to help cover processing costs.

Step-by-Step Wage Garnishment Process

Wages may be withheld in-house or by a third-party payroll provider. While each situation is unique, establishing a payroll garnishment process helps ensure your organization handles it accurately every single time. Here’s a step-by-step guide on how wage garnishments are typically managed from an employer’s perspective:

• Step 1: Legal notice with garnishment instructions is sent to your organization.
• Step 2: Notify the employee about the situation.
• Step 3: Officially acknowledge receipt and intention to comply with the order.
• Step 4: Calculate and withhold the appropriate amount from the employee’s paycheck.
• Step 5: Pay your employee their regular wage minus the withheld amount.
• Step 6: Send the garnished portion directly to the party listed in the notice by the assigned due date.
• Step 7: Keep remitting payments until you receive a notice of release indicating the debt is paid in full.

What Employers Should Know About Wage Garnishments

It’s important to know your rights and responsibilities regarding wage garnishments. Your organization’s legal team can help you navigate the complexities of the law, but here are some facts employers should know.

Can You Garnish a 1099 Employee?

Unless state/federal law indicates otherwise, you can’t garnish the wages of a freelancer or independent contractor. For instance, child support is one exception—if you receive an Income Withholding for Support (IWO), you must garnish their wages accordingly.

How to Handle Multiple Garnishment Orders for the Same Employee

It’s possible for a single employee to incur multiple garnishment orders. Generally, you can prioritize them on a first-come, first-served basis. But some orders may take precedence over others. For example, child support often trumps other types of debt.

Can You Refuse to Garnish an Employee’s Wages?

As uncomfortable as it may be, you cannot refuse to garnish someone’s wages. Employers are legally obligated to comply with the order. Otherwise, you may face penalties, fines, and even liability for the total balance.

Wage Garnishment vs. Voluntary Wage Assignment

Built into certain types of lending programs, voluntary wage assignment allows a creditor to take money from an employee’s paycheck to repay a debt. While wage garnishment is court-ordered, wage assignment is an agreed-upon term that goes into effect if the employee defaults. It’s guided by state law, and the employee can cancel it at any time.

How to Discuss Wage Garnishment with Employees

Before sitting down with an employee, it’s worth doing a little prep beforehand. The more you know, the better equipped you’ll be to present the facts, put any misconceptions to rest, and answer common questions about wage garnishment, such as:

Can You Be Fired for Wage Garnishment?

It’s against federal law to fire an employee for having any single garnishment, no matter what it is or how many attempts have been made to collect. This CCPA rule doesn’t apply to employees with two or more judgments, but state laws may offer greater protections.

How Can I Stop a Wage Garnishment Immediately?

Garnishment ends when the debt is fully paid, but employees may have other options. Here are some ways to stop a wage garnishment:

• Challenge the order
• File a claim of exemption
• Negotiate with the creditor
• File for bankruptcy

Will I Know If My Wages Are Being Garnished?

Once enacted, garnishments show up on the employee’s pay stub. A line item under the payroll deduction section shows the amount taken.

How Do I Check My Garnishment Balance?

Employees should know how much they owe and how much is taken out of each paycheck, so they can keep track of their balance themselves. They can also contact their creditor or your payroll administrator to find out how much is left.

What Employees Can Do About a Garnishment Order

Employees struggling to pay their bills can take an active role in their financial situation but may not know where to start. Some things they can do include:

• Creating a household budget that accounts for reduced wages
• Consulting a credit counselor for long-term assistance
• Finding ways to rebuild their credit score, which takes a hit
• Exploring debt relief options
• Seeking legal counsel

Resources like employer-sponsored financial wellness programs help people feel more empowered to take control of their situation—and with the right tools, you can spend more time enacting meaningful initiatives. Payroll software helps make processing garnishments much easier on your end, especially as you’re spending more time helping your workforce overcome hardships that put their personal and professional lives in the balance.