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Wage Garnishment 101 and Your Organization

By March 25, 2024No Comments
Woman handing a person their paycheck in an article about Garnished wages.

Continual training and preparation is a crucial part of a successful and efficient human resources department, as it ensures no process or issue emerges which is too big to tackle. The wage garnishment process is a highly complex and legally fraught one that your organization has to take seriously or face legal consequences. As a nonprofit, your HR and payroll teams are likely used to working with limited resources, but tricky issues like the garnishment procedure can add stress and pressure, which is all the more reason to prepare and ensure your team is familiar with their obligations.

Wage garnishment is fairly common, with an estimated 7% of workers obligated to some form of garnishment. Despite this, the complex federal and state laws governing different types of debt and garnishment can make the process difficult to follow, which presents a serious risk to organizations that may not be able to resource their payroll and HR teams as much as they’d like. However, by learning the basics and investing in training and policy creation, you can head off many of these issues and fulfill your organizational obligations upon receiving a garnishment order. Here are some of the critical elements you should know:

What is wage garnishment?

Wage garnishment or wage citations, as they are sometimes known, are a court-ordered process whereby a portion of a person’s wages are withheld by their employer in order to help repay a debt that person has incurred. Seemingly simple, these processes can get complex when determining the percentage of wages withheld, or what is considered a “wage”, as well as the exact amount that can be withheld and dispersed to the debtor. The most common reason for garnishment is the repayment of child support, with other common reasons being student debt repayment, bankruptcy filings, and tax-related debt.

How does wage garnishment work?

The process varies depending on the specific state laws in place where your organization is based as well as federal law, but the basic framework is as follows:

  1. Some form of litigation occurs, either in a court hearing, a contractual agreement, or other legally binding process, whereby your employee is determined to be responsible for the repayment of a debt. The debtor can then get a judgment allowing them to seek to be made whole. If your employee cannot do this, the debtor can proceed by garnishing your employee’s wages.
  2. Once this determination is made, your organization is presented with a garnishment order, legally requiring you to provide information about the employee’s work status, wages, benefits, and other forms of remuneration. Responding promptly is an obligation, and failing to do so can create legal issues for your organization.
  3. Internally, you will need to examine the payment structure for the employee, including how much they make, the payment schedule, and so on, as this will be used to determine how much is garnished and how often. Wages include everything from hourly and salary payments to commissions, profit-sharing arrangements, bonuses, holiday pay, workers’ compensation, and so on. You are also required to follow Title III, which is intended to prevent excessive debt repayments that put undue financial strain on your employee by setting an upper limit on the amount of wages that can be garnished. These numbers change from state to state and also depend on the type of debt incurred.
  4. Once these determinations are made and transmitted to the debtor, you will continue to withhold wages and disperse them to the debtor until the debt is repaid or the garnishment order is rescinded. Questions about the order, changes to employment status, and all other concerns are to be directed to the state or courts for consideration.
  5. Finally, it’s important to keep your employee informed on the process and any changes that may occur. They should have access to the same information that is available to the debtor, including all calculations and garnishment orders.

Additional obligations and considerations

As the employer, you are the de facto administrator of this form of debt repayment. This means you are obligated to facilitate calculations and payments, document and store these records, respond to any changes or requests for documentation by the court or state, and do all of this in a timely manner. Because of the complex nature of these obligations, it is best to have some legal advice on the matter, as this can help you catch any mistakes or formatting errors before they put you at risk.

Fortunately, most modern payment processing platforms have tools to handle these situations, allowing you to make calculations quickly and adhere to local laws. Additionally, as the administrator of these payments, many states allow you to take a percentage of the garnished wages as an administrative fee. However, this only applies in situations where some wages are being garnished — if your employee makes too little to be subject to garnishment, you cannot take such a fee.

Finally, it’s critical that you do not punish or dismiss an employee because of a garnishment order. Title III laws forbid you from dismissing any employee on the basis of them requiring you to garnish wages. However, this does not protect them from layoff or firing for other legal reasons. Like the protection from excessive debt repayment, this element of Title III is in place to protect employees from experiencing a disruption to their life out of the scope of the intent of the debt repayment — it isn’t in anyone’s interest for the person to lose their job, least of all the debtor.

Our team of nonprofit experts is here to help you prepare for any situation

Nobody knows your organization as well as you and your team, but facing current and future challenges means getting help from those who have been there before. Our team of experts in the nonprofit space are here to help you identify new opportunities and resources to help you meet any challenges head-on. If you’d like to learn about what we do and how we can help your organization, please get in touch with us.


For more than 40 years, 501(c) Services has been a leader in offering solutions for unemployment costs, claims management, and HR support to nonprofit organizations. Two of our most popular programs are the 501(c) Agencies Trust and 501(c) HR Services. We understand the importance of compliance and accuracy and are committed to providing our clients with customized plans that fit their needs.

Contact us today to see if your organization could benefit from our services.

Are you already working with us and need assistance with an HR or unemployment issue? Contact us here.

The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.


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