Federal Wage Garnishment Rules and Procedures

What to do if you need to garnish an employee's wages

By Matt Alderton, Writer, Editor and Media Consultant, Logolepsy Custom Content and Communications

It's a fact of life: Not everyone pays his or her bills. Sometimes, when that happens, creditors might turn to a debtor's employer for help through a process called wage garnishment. Garnishment is a court-ordered process whereby a person's property is confiscated to pay a debt; in the case of wage garnishment, that property is one's paycheck. The federal government protects debtors and sets limits on the amount of wages that can be garnished from an individual. State governments, meanwhile, enforce their own, separate debt collection laws.

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.

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).
Try: 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.
Try: 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.
Try: 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.
Try: 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.
Try: Download a copy of form SF-329E from the U.S. General Services Web site.