What should you do when you are notified of a child support garnishment for one of your employees? Does the process work the same as for other garnishments? What are your obligations as an employer when it comes to child support payments?
What is wage garnishment?
Wage garnishment is a legal procedure in which a person’s earnings are withheld by an employer for the payment of a debt. Garnishment is initiated through court order or a government-issued action. Typical situations that incur wage garnishments are:
- Unpaid taxes
- Child Support
- Student loan repayment
- Consumer debt
Voluntary payroll deductions for such benefits as medical insurance or health savings accounts are not considered wage garnishments.
What is child support garnishment?
A noncustodial parent pays child support through a private arrangement between both parents. Employers are not required to participate in privately arranged child support payments. However, if private arrangements are not made or are not working, court-ordered payments may be required by the Office of Child Support Enforcement in each state. Court-mandated child support is a wage garnishment that is the employer’s responsibility. Child support garnishments take priority over almost every other type of garnishment, and they should not be ignored.
What is an Income Withholding Order (IWO)?
A court or child support agency may decide to take child support payments directly from the noncustodial parent’s wages. If they do, you will receive an IWO, which provides the following information:
- Employee’s name
- Amount to withhold
- Where to send payment
Most states will give you 7 to 14 days after the IWO was mailed to begin taking out child support payments. If you fail to comply, you can face penalties or fines. Be sure to contact the sender of the IWO if you have questions.
What compensation is subject to garnishment?
Most garnishments are based on the employee’s disposable income, which is gross pay minus mandatory deductions.
- Mandatory deductions are all government-required taxes, such as federal, state and local income taxes, social security, and Medicare. Some states may have laws that require additional deductions.
- Gross wages include salaries, bonuses, sales commissions as well as earnings from pensions or retirement plans. Tips are not included in gross wages.
Payroll deductions such as medical insurance or personal benefit programs are not mandatory deductions and are not used to calculate disposable income.
The good news is that your payroll company or payroll software can likely handle this calculation for you.
How much money can be garnished?
The Consumer Credit Protection Act (CCPA) determines the federal limits for child support garnishments. These limits are based on the calculated disposable income. The federal CCPA value to use should be listed in the IWO. The value is a percentage to be applied to the disposable income amount. These limits are:
- 50%: Employee supports another spouse or child
- 55%: Employee supports another spouse or child, and payments are more than 12 weeks late
- 60%: Employee does not support another spouse or child
- 65%: Employee does not support another spouse or child, and payments are more than 12 weeks late
Some states have lower withholding limits than the CCPA, so be sure to check the limit provided in the IWO. You may want to contact your state Office of Child Support Enforcement to be sure you are using the appropriate percentage.
As the employer, you are responsible for determining if the amount specified in the IWO exceeds the CCPA value and adjust the garnishment accordingly. Be especially careful to withhold the correct amount; rectifying an error can be time-consuming, if not costly.
Can you fire a worker due to garnished wages?
Under CCPA provisions, you cannot discipline or terminate an employee for wage garnishment for a single debt. This protection does not extend to employees with multiple wage garnishments. Again, each state is different, so you will need to check the applicable state regulations before you attempt to discipline or terminate an employee for wage garnishments.
Calculating and processing child support payments costs you time and money. In some states, you can seek reimbursement for the administrative costs associated with garnishments. The limits are state-determined, and not all states allow you to charge an administrative fee. Check with your state Office of Child Support Enforcement before assessing an administrative fee.
What are my obligations as an employer?
Once you are notified of a wage garnishment, you should alert the employee in writing of the court order. A form may be provided as part of the IWO that you can use to inform the employee of the garnishment. If a form is not provided, draft a letter detailing the amount to be garnished from each pay, the specifics of the garnishment and how long the garnishment will be enforced. Be sure to retain a copy for your records.
At the same time, notify your payroll service or payroll department so they can ensure the garnishment is withheld and remitted to the proper authority. Payroll should ensure that payments are sent to the correct agency by the stated deadline. Typically, you have five to seven days after a paycheck is issued to deposit the child support amount with the agency. It is advisable to keep thorough records of all payments in case a payment is called into question.
The procedure for stopping child support garnishment varies from state to state. In all cases, you should receive written authorization to stop the garnishment. Do not stop withholding child support until you receive written authorization regardless of what an employee may tell you.
Where to go for help?
It is always a good idea to discuss payroll-related matters with payroll experts. If you’ve been notified of wage garnishment and you have questions, ask us at Cirrus Payroll. We are ready to answer your questions about garnishments or any payroll-related matters.