Wage Garnishment Compliance: What Employers Need to Know

Wage garnishment is more common than many employers realize—and it comes with serious responsibilities. If your business receives a garnishment order from a court or government agency, you’re legally required to respond quickly and accurately, following federal and state regulations that can vary widely based on the type of debt and where your employees live or work.

This article breaks down what wage garnishment is, what types of debts are involved, and the steps you, as an employer, must take to stay compliant. You’ll also learn how to calculate withholdings, navigate multistate requirements, and avoid costly mistakes—and how a trusted HR partner like G&A can support your efforts every step of the way.

What is wage garnishment?

Wage garnishment is a legal procedure that requires employers to withhold a portion of an employee’s earnings to pay off a debt or financial obligation that the employee has not paid voluntarily. The withheld wages are then sent directly to the creditor or government agency that issued the order.

It’s important to note that if an employee voluntarily authorizes their employer to deduct a specified amount from their earnings and send it to a creditor, it’s considered a voluntary wage assignment—not a wage garnishment—and it is not subject to wage garnishment laws.

How does wage garnishment work?

You will typically be informed of a wage garnishment through a court-issued order or an official notice from a government agency. Once you receive the order, you are legally obligated to:

• Withhold a specific percentage of your employee’s disposable income, as detailed in the garnishment notice.
• Remit the withheld funds directly to the designated creditor or agency by the specified deadline.

Start the deductions right away and continue them each pay period until you receive official instructions to stop. If the employee is no longer employed by your company, immediately notify the court or agency that issued the order.

How is garnishment calculated?

Garnishment amounts are based on an employee’s disposable income—that is, the employee’s earnings left after legally required deductions are taken out. These mandatory deductions typically include:

• Federal, state, and local income taxes
• Social Security and Medicare (FICA) taxes
• Unemployment insurance taxes

Voluntary deductions—such as union dues, health or life insurance premiums, charitable donations, and most retirement plan contributions—are not subtracted when calculating disposable income for garnishment purposes unless required by law.

What types of compensation can be garnished?

A wide range of employee compensation may be subject to garnishment, including:

• Salaries and hourly wages
• Bonuses (including sales commissions, referral, sign-on, attendance, and safety bonuses)
• Profit-sharing or incentive payments
• Moving or relocation expense reimbursements
• Workers’ compensation wage replacement payments
• Severance payments

Some types of income are typically excluded from garnishment, such as educational incentives and certain types of employee tips, depending on state law and the nature of the compensation.

What type of debt can result in garnished wages?

In the U.S., unpaid child support is the most common reason for wage garnishment, but it’s far from the only one. Employees’ wages may also be garnished for a range of debts, including:

• Unpaid taxes (federal, state, or local)
• Court-ordered alimony
• Delinquent student loans
• Consumer debt, such as unpaid credit card charges, personal or auto loans, medical bills, etc.
• Bankruptcy-related obligations

Wage Garnishment Procedures for Employers

If your business receives a wage garnishment order, it’s important to respond quickly and follow each step carefully to stay compliant and avoid costly penalties. Here are the basic steps you will need to take:

1. Acknowledge and review the garnishment order: When you receive a wage garnishment order, review it carefully for accuracy and legitimacy. Identify the issuing court or agency, confirm the employee's details, note the total amount owed, and follow the specific withholding instructions.
   
   G&A Tip: First, verify that the order is from a legitimate source. It should come from a court or a federal or state government agency—not a private party.
   
   
2. Inform your employee promptly and professionally: Within the legally required timeframe, notify the affected employee about the garnishment order. Deliver the news with sensitivity and discretion, share a copy of the order, and provide any relevant company policies or contact information for further inquiries.
   
   G&A Tip: This is may be an uncomfortable and embarrassing situation for your employee—but don’t delay the conversation. A thoughtful, respectful approach goes a long way.
   
   
3. Complete and submit the statutory response: Many jurisdictions require employers to complete and file a statutory response form with the issuing court or agency. This form typically confirms the employee's employment status and outlines your intent to comply with the wage garnishment order. Ensure timely and accurate submission to avoid potential penalties.
   
   G&A Tip: If you fail to meet any of the requirements of the wage garnishment process (including missing a deadline or submitting incorrect information), the penalties can be severe. In fact, you could be legally liable for the full amount owed, plus fines, penalties, and legal fees.
   
   
4. Accurately calculate the withholding amount: Use the instructions in the garnishment order and applicable federal and state laws to calculate the correct withholding amount. Be mindful of any protected wage amounts or limitations on how much of an employee’s wages can be garnished.
   
   G&A Tip: This is one of the most complex parts of the process, requiring in-depth knowledge and a clear understanding of applicable state and federal laws. To ensure accuracy, consider consulting with an HR or legal professional.
   
   
5. Remit payments to the designated creditor or agency: Follow the instructions provided in the garnishment order to ensure you are sending the withheld wages to the appropriate recipient. Pay in a timely manner, track each payment, and maintain records of each remittance, including dates and amounts.
   
   G&A Tip: You must start to garnish wages and submit the funds immediately, even if the employee plans to dispute the order or you believe the order is a mistake. Continue making payments according to the order until officially instructed otherwise.
   
   
6. Maintain comprehensive records: Keep detailed records of all wage garnishment-related documents, including the original order, employee notifications, any statutory responses or filings, withholding calculations, and all payment records.
   
   G&A Tip: Follow this step carefully. This documentation is essential for your protection in the event of a dispute, audit, or legal inquiry.
   
   
7. Cease garnishment when legally required: Stop wage garnishments only when you receive official notification (documentation) stating that the debt has been paid, the order has been lifted, or your legal obligation has otherwise ended. Communicate this cessation to the employee.
   
   G&A Tip: Remember, never stop garnishments unless you receive official notification. Doing so prematurely could put your business at legal and financial risk.