Payroll Law on Employee Debt
Payroll garnishment is a court-ordered process when someone becomes a debtor. An employee's paycheck is used to pay the debt. The federal government sets the rules for how an employee's debts are paid through payroll.
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Debtor Employees & Creditors
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If an employee is a debtor, the creditor will send the employer a Wage Garnishment Package (SF-329). This package will include the necessary legal notifications of the payroll deduction to be made. Employers are legally bound to complete and return the form within 20 days of receipt.
Mandatory Compliance
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Employers must comply with a garnishment order, and they must make the regular deduction from the employee's check and send the payment directly to the creditor. Taking out too much can get an employer in trouble with an employee and taking out too little can bring legal recourse from the creditor.
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Treasury Form SF-329
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Although the process can be complicated, the employer must comply or face legal ramifications. The U.S. Department of the Treasury Financial Management Service provides the SF-329 form to assist employers in making payroll deductions in the court-ordered manner.
Exceptions
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Social Security benefits, unemployment insurance wages, workers' compensation, disability or health insurance benefits and retirement plans are off-limits to creditors.
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