How to Process a Wage Garnishment
To recover monies a debtor owes, the related institution can issue a wage garnishment. The U.S. Department of Labor (DOL) notes that the wage garnishment orders the debtor’s employer to withhold a part of his wages to satisfy the debt. The wage garnishment can be court-ordered or from a statutory organization, such as the U.S. Department of Education or the IRS. Notably, statutory institutions can issue a wage garnishment without a court order. The employer must comply with the terms of the wage garnishment.
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Instructions
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Establish a mail handling system that sends wage garnishments to the correct department immediately upon receipt. The payroll person usually processes wage garnishments. The latter is time-sensitive; typically, the employer must begin the withholding by the employee’s next pay period. An ineffective mail handling system can result in untimely wage garnishment processing.
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Follow the withholding instructions on the wage garnishment. This varies by wage garnishment. Overall, however, you cannot withhold more than 25 percent of the employee’s disposable pay (amount before deductions), according to the DOL. For IRS wage garnishments, use Publication 1494 included in your levy notice to figure the withholding.
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Continue the withholding until the employee satisfies the garnishment amount or until the issuing institution orders you to stop. If the employee terminates before fulfilling the wage garnishment, let the issuing institution know her termination date, and her new employer, if known.
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Tips & Warnings
Do not garnish more than 15 percent of disposable income for student loans, according to Federal Student Aid. You can withhold more than one wage garnishment at a time, provided the total amount does not exceed 25 percent. For student loans, you can process more than one wage garnishment simultaneously, provided the amount does not exceed 15 percent. Failure to comply with the terms of a wage garnishment comes with harsh consequences. Title III of the Consumer Credit Protection Act (CCPA) forbids you from discharging a worker because you received one wage garnishment against him. Violating Title III can result in criminal prosecution and/or a monetary fine from the DOL. Furthermore, if you fail to withhold the garnishment appropriately, you can be required to restore the wrongly withheld amount and to pay back wages to the employee, if you inappropriately discharged him.
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