In the wage garnishment process, there are three parties: your employee (the debtor), the party that’s owed money (the creditor) and you, the employer (the garnishee). As an employer, you’re legally bound to comply with wage garnishment court orders. It’s your responsibility to make the proper deductions from your employee’s paycheck and send payments to the creditor. Common reasons for wage garnishment include:
- Alimony.
- Child support.
- Defaulted student loans.
- Bad debts.
- Bankruptcy.
- Tax levies.
Action Steps
The best contacts and resources to help you get it done
Submit the proper forms
If an employee's wages are to be garnished, the creditor will notify you by sending you a Wage Garnishment package (SF-329). This package includes a letter to the employer (SF-329A), the wage garnishment order (SF-329B), a wage garnishment worksheet (SF-329C) and an employer certification form (SF-329D).I recommend: Complete and return the employer certification form (SF-329D) within 20 days of receipt. If you don't, you may be subject to civil and criminal action. Download form SF-329 from Financial Management Service, a bureau of the U.S. Department of the Treasury.
Calculate withholdings and make payments
Calculating the proper amount to garnish can be extremely complicated. Do it wrong and you could face legal repercussions. Even if you're within the legal limits, you can still draw heat from a creditor for garnishing too little or from your employee for garnishing too much. Payments are generally made each pay period.I recommend: Many payroll services, such as PayChex, offer garnishment payment services to help you handle the task. Or try payroll software, such as Paysoft or Ultimate Software, which offer solutions to calculate garnishment amounts.
Prioritize garnishments
In some cases, an employee's wages may be garnished by more than one creditor. For instance, you may be asked to garnish wages for child support and for a defaulted student loan. It's your responsibility to know which types of garnishments take priority.I recommend: To prioritize correctly, consider purchasing the Employer's Guide to Garnishment. It's pricey, but it can help keep you out of legal hot water.
Reimbursement fees
In some states, the garnishee can be reimbursed for administrative costs associated with processing garnishments.I recommend: Download a guide from payroll specialist ADP that lists reimbursement amounts for each state.
Termination of garnishment
When your employee's debt has been paid off, the creditor will notify you with a Notice of Termination of Wage Garnishment Order (SF-329E). Once you receive this form, you are to stop deducting withholdings from the employee's paycheck immediately.I recommend: Download a copy of form SF-329E from the U.S. General Services Web site.
Tips & Tactics
Helpful advice for making the most of this Guide
- It is illegal to fire an employee or to take any negative action against them because their wages are being garnished.
- If your employee quits, you are no longer required to make payments.
- Social security benefits, unemployment insurance wages, workers' compensation, disability or health insurance benefits and retirement plans are off limits.
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