The Impact of Software Wage Garnishment on Payroll Processing

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Wage garnishment is the legal process by which a creditor can force your employer to divert part of an employee’s paycheck to pay off debt. Creditors can use non-wage garnishment methods, such as levies, to seize an employee’s financial accounts. It’s more common than you might think to have your wages garnished. It can happen for various reasons, including child support and alimony.


Wage garnishment is a debt collection process that can be used by both the IRS and private creditors. Your employer must withhold a specific percentage of your paycheck and send it directly to the agency or creditor that is owed money. It’s a common way for creditors to collect unpaid debt, and it’s often overseen by federal agencies to ensure that employers follow Title III of the Consumer Credit Protection Act (CCPA) which protects debtors by limiting how much of their disposable income can be garnished. When an employee receives a wage garnishment, your software system must handle these deductions correctly.

Whether you are taking one or many garnishments, your payroll processing software must be able to calculate the garnishment amount and accurately deduct it from each paycheck. It should also identify the type of garnishment and the associated order on the employee’s check stub. While scalability is important for all businesses, it’s particularly critical for mission-critical systems that impact compliance and other high-risk functions. If your software can’t handle an unexpected surge in demand, it could cost you valuable time and money. In other words, if your system isn’t scalable, you may miss out on opportunities to grow your business.


Wage garnishments are a debt collection process that requires an employer to withhold a percentage of an employee’s paycheck and send it to the person or company to whom the employee owes money until the debt is paid. Creditors can be federal, state, or private entities, and many wage garnishments are based on court orders from government agencies. Wage garnishments must follow stringent rules and regulations that vary from state to state. While the idea of a wage garnishment may evoke images of deadbeat dads who owe spousal and child support, the truth is that more than one in 10 working Americans had their wages garnished in 2013—and most of those garnishments were for non-support debts such as past-due taxes, medical bills, credit card debt, student loans, and more.

In addition, while federal law prohibits employers from firing employees whose wages are being garnished for a single debt, laws differ by state. The law also stipulates that only an employee’s “disposable” earnings are subject to garnishment, and the definition of disposable income is determined by subtracting legally required deductions from an employee’s pay. Wages earned from tips, however, are not eligible for garnishment. An HRIS system with wage garnishment payroll capabilities will also provide a clear explanation of which types of wages qualify for garnishment and which are not.


Wage garnishment, also known as wage deduction, occurs when a court requires an employer to withhold a portion of an employee’s paycheck and send it directly to a creditor or person to whom they owe money until that debt is resolved. It’s not uncommon for creditors to sue an individual for non-payment of debt, and if they win in court, they will receive a judgment allowing them to collect wages through garnishment.

When an employer receives a wage garnishment order from a creditor, the federal government or other agency, they must comply. This means they must notify the affected employee and follow specific rules depending on the type of debt. For example, child support and tax-related garnishments take priority over other debts like consumer debt and defaulted loans.

As an employer, you need a payroll solution that can handle the many complexities of wage garnishment. This includes accurately calculating garnishment deductions and identifying them on each employee’s check stub. This can be challenging, as garnishments are often based on an employee’s disposable earnings, which is the amount left over from mandatory deductions like taxes and Social Security. The right solution will provide you with the tools to easily customize and adjust garnishment calculations and allow you to track each employee’s garnishment balance.


As an organization, it’s critical to comply with government regulations and standards. This is especially true regarding wage garnishment laws, as noncompliance can result in hefty penalties. Wage garnishments are court-ordered deductions from an employee’s paycheck to pay for a debt. These payments can be for unpaid child support, taxes, student loans, or credit card balances. The law allows creditors to garnish up to 10% of an employee’s disposable wages (which is the amount that remains after mandatory deductions such as taxes and Social Security have been taken out).

When a wage garnishment is initiated, the employer and the debtor will receive a letter or a notice from the court or a government agency outlining the order’s details. The writ of garnishment may also be referred to as an income withholding order or a garnishment certificate. In some cases, the garnishment may be temporary and can end once the debt is paid or if the debtor files for bankruptcy. It’s important to know that the debtor can only have a maximum of two garnishments at a time. In addition, there are several other rules regarding the type of debt that can be garnished, such as whether it’s for child support or alimony. These laws can confuse employees and employers, so it’s best to consult legal counsel to understand the nuances.