Payroll processing Garnishments and Liens

Proper adjudication of garnishments and liens in payroll processing

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Payroll Processing - Garnishments and Liens Administration

Payroll processing outsourcing

A court may order one or more of your employees to pay a debt through deductions from their paycheck. Your business will receive a notice in the mail stating where the payments must go and how much to take out each pay period. Failure to execute the terms of a court order can result in fines for the employer. Laws vary from state to state. The most common forms of payroll garnishments and liens are:

  • Back taxes
  • Child support
  • Loans in default
  • Medical bills
  • Other debts

How do payroll garnishments work?

Regardless of how many garnishment orders your company receives for one employee, federal law limits the amount withheld in a workweek based on whether the garnishment is for child and/or spousal support, bankruptcy, tax levies, student loans, or debt payment. Typically for debt payment, the amount withheld is either the lesser of 25% of disposable earnings or whatever an employee earns that exceeds 30 times minimum wage. For Child/Spousal support the amount withheld is can be 50% to 60% of disposable income. Student loans can be up to 15% of disposable income. In addition, an ordering sequence is required when an employee has more than one garnishment. These various limits were established under the CCPA (Consumer Credit Protection Act).

Can payroll management by a PEO help you?

A good Professional Employer Organization like Human Resources, Inc. can work with the local court system to ensure that garnishments and liens have been properly adjudicated and ensure that there will not be too much or too little removed from your employee’s paycheck. A direct line of payment can be setup with the same frequency of your payroll between the employee’s deduction and their debt. Additionally, these instances are of a very personal nature and confidentiality is of the utmost importance. A PEO is an outside resource which keeps the chances of critical and potentially damaging information from spreading to other employees non-existent.

Find out how else Human Resources, Inc. can improve your payroll process

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