A Basic Guide on How to Process Payroll Garnishments

Do You Know How to Process Payroll Garnishments? We Answer Your Top Questions


Have you been asked to garnish an employee’s wages? If so, you probably have questions.


Getting answers sooner than later will ensure you stay on the right side of the law and avoid penalties. As a Professional Employer Organization who offers payroll services, we’re qualified to answer your top questions, like how to process payroll garnishments and how to know when garnishments can stop. Here’s what you need to know.


What Are Payroll Garnishments?

Payroll garnishments are legal procedures in which a person’s earnings are withheld by their employer and given to a creditor. These procedures require court orders and must originate from a qualified source. Possible scenarios that could warrant payroll garnishments include:


  • Unpaid federal or state taxes
  • Overpaid social security or unemployment benefits
  • Alimony
  • Student loans
  • Child support
  • Credit card debt
  • Hospital and medical bills
  • Personal bankruptcy


Anyone working within the United States can have their pay garnished if their unique situations meet federal and applicable state laws.


How Will I Be Informed of a Payroll Garnishment Requirement?

Creditors have different methods of informing employers of payroll garnishment requirements. But a court order is almost always required (if the creditor is the IRS, they do not need one).


If you do receive notification of payroll garnishment for an employee, know that most orders are time sensitive and that compliance isn’t an option.


Should you have any doubts regarding the validity of a payroll garnishment requirement, don’t be afraid to reach out to the creditor for confirmation. Even if the employee claims the debt has been handled, assume you will be moving forward with the garnishment process.


What Next Steps Should I Take?

Once receiving and confirming a payroll garnishment requirement, there are several steps you should take.


First, inform the employee. In some states, you may be required to inform your employee in writing. In other areas of the country, verbal confirmation may be enough.


However, we recommend that you use the form provided by the creditor, if applicable, or draft a letter that includes a copy of the official order. This will ensure the employee is fully notified and provide them with the opportunity to reach out to the creditor if needed.


Next, start the garnishment process. If you don’t already have a payroll garnishment process outlined for your business, now’s the time to do so. Whether you choose to turn to a third-party payroll processing service or handle the requirements in-house is up to you, but having an outlined process is important.


However, this is where wage garnishment can get tricky for many employers. Every situation is unique and there may be different rules for how to calculate a garnishment (once you know the specifics, a garnishment calculator can help).


An employee may be facing more than one garnishment requirement and submitting proper documentation can be intimidating to employers. We recommend reaching out to your local legal council familiar with your specific state’s laws and requirements to make sure you’re checking all the boxes.


Finally, stay on top of changes. Whether it’s a change in federal or local law or a change to an employee’s garnishment requirements, making sure you’re always current will provide peace of mind.


When Can I Stop Garnishing My Employee’s Pay?

You cannot stop garnishing an employee’s pay until the debt has been paid. Never make the mistake of assuming a debt has been paid in full or that the employee has handled it on their own. When a debt has been settled, you will be provided with a release from the creditor.


Understanding How to Process Payroll Garnishments

Because of the infinite number of garnishment scenarios, it’s impossible for us to layout a specific process for your unique business to follow. Just know that in general, your responsibilities include:


  • Notifying the employee of the garnishment order
  • Calculating and withholding the appropriate wages
  • Sending garnished wages directly to the creditor
  • Continuing garnishments until you receive a release


Garnishing wages can be an intimidating task for any employer. Luckily, there are plenty of resources available to help you learn how to process payroll garnishments. But if you’re still nervous about the process, remember that a third-party payroll system can help with garnishments, overall payroll duties, and even protect you from payroll scams.


If you do not have an HR partner, Tandem HR is happy to help you with this process. Fill out the form below or give us a call today at 630-928-0510.

Tandem HR is an IRS Certified Professional Employer Organization (CPEO) providing hundreds of businesses with high-touch and custom HR solutions. We also provide payroll, benefits, risk management, employee relations, and much more.