Handling wage garnishments in payroll: priority, limits and common mistakes

Wage garnishments are one of the highest-risk parts of payroll: get them wrong and you expose the employer to liability, not just the employee. They’re also unforgiving, because the rules come from courts and agencies, not from your policies. Here’s how to handle them properly.

What garnishments are

A garnishment is a legal order requiring the employer to withhold part of an employee’s pay and send it to a third party. The common types are child support, federal and state tax levies, creditor garnishments and student-loan garnishments — each with its own rules.

Your obligations as the employer

• Withhold the correct amount, calculated on disposable earnings (pay after legally required deductions), not gross pay.
• Remit to the right party by the required deadline.
• Respond to the order as instructed — ignoring an order can make the employer liable for the amount.

Limits and priority

Federal law caps how much of an employee’s disposable earnings can be garnished, with a higher cap for child support and a different calculation for tax levies. States may impose stricter limits, so the employee’s state matters. When more than one order applies, they follow an order of priority — child support generally comes first, then federal tax levies, then others — and the combined total still can’t exceed the legal cap.

Common mistakes

• Garnishing on gross pay instead of disposable earnings.
• Ignoring priority when several orders stack, or exceeding the combined cap.
• Missing remittance deadlines, or failing to respond to the order at all.
• Stopping or starting a garnishment without the order to support it.

At scale, garnishments can’t be handled by hand — they have to apply correctly and automatically per employee, every run. It’s one of the reasons high-volume payroll needs software built for the compliance, not just the arithmetic.