Wage Garnishments: Rules & Guidelines for Employers

When you're notified of the need to garnish an employee's wages by a federal or state agency or court, it isn't always clear what's expected of you. Compliance is mandatory and time-sensitive, and failing to comply with a garnishment order can result in fines and penalties, so understanding your obligations matters.

Garnishments have specific forms and rules governing payroll calculations, and the rules can get even more complex when an employee has multiple orders. Review the answers below to the questions you're most likely asking about the wage garnishment process.

What Is Wage Garnishment?

A wage garnishment is a legal procedure where part of a person's earnings are withheld by an employer for the payment of a debt. A payroll garnishment is typically initiated through a court order or government agency action, such as an IRS levy. When you're notified of an order to garnish wages, you're legally obligated to make the appropriate deductions from the employee's wages and direct payments to a designated agency or creditor.

How Much of an Employee's Wages Can Be Garnished?

The maximum amount of wages garnished varies depending on the type of debt, ranging from 15% of disposable earnings for student loans to as much as 65% of disposable earnings for child support (if the employee is at least 12 weeks in arrears).

In states with laws that differ from federal wage garnishment requirements, you must comply with the state law demanding a lesser garnishment. For example, North Carolina, South Carolina, Pennsylvania, and Texas, generally prohibit wage garnishment for consumer debts altogether, and California has its own set of payroll compliance rules to consider that employers must remain aware of. to consider.

Confirm what's required of you under state law before proceeding with a garnishment and consult legal counsel where appropriate. No matter how high the debt, your employees are always allowed to keep a certain percentage of their paycheck for general living expenses.

Always refer to the individual's court order to determine the correct percentage to withhold. Failing to do so may leave you liable for the total garnishment amount.

Federal Student Loan Garnishment Has Resumed: What Employers Should Know

After a pause of more than five years, the Department of Education resumed Administrative Wage Garnishment (AWG) for defaulted federal student loans. The first notices went out in early January 2026, and volume has been rising month over month since.

A federal student loan garnishment order functions like any other garnishment you may already process: it follows a required 30-day notice period and caps withholding at 15% of an employee's disposable pay. If you haven't handled this type of order in several years, now's a good time to refresh your internal procedures, since more of these orders are expected to arrive.

What Rules Should an Employer Follow if an Employee Has Multiple Garnishment Orders?

If you receive multiple wage garnishment orders on an employee, there are rules in place that govern who gets paid first. Generally, it's first-come, first-served, but some debt obligations take priority, especially once the garnishment rate is already at its maximum. Child support and tax-related garnishments, for example, take precedence regardless of when the notice is served. Against those tax or child support wage garnishments, other debts, such as consumer debt or defaulted loans, will be delayed, or their repayment rate reduced, if the employee's wages can accommodate it.

If an employee files for bankruptcy, an automatic stay generally halts most active garnishments the moment the petition is filed — the employer must stop remitting that creditor once notified. Child support and alimony obligations are the major exception: withholding continues as normal. Because the rules vary by debt type and bankruptcy chapter, confirm next steps with the employee's bankruptcy trustee or your legal counsel before making any changes to withholding.

How Will You Be Notified if an Employee's Wages Need To Be Garnished?

You're typically notified of a wage garnishment through a court order or an IRS levy. The IRS always sends notice of a wage garnishment directly to you, and that notice doesn't need to come from a court. Whatever the source, compliance is required as soon as the order arrives, so you'll need to begin withholding and remitting payment right away.

The paperwork accompanying a garnishment, such as IRS wage garnishment or levy forms, typically walks you through the required steps and includes contact information for questions.

How To Garnish Wages

Once you're notified of a garnishment order, you can follow a consistent process to stay compliant:

1. Receive and log the order. Confirm the type of garnishment, the withholding percentage, and any deadlines noted on the notice.
2. Notify the employee in writing. Some garnishments include a required form for this step, such as Form 668 for a federal levy. Otherwise, a letter detailing the order, withholding amount, and duration works.
3. Alert payroll and HR. Give the teams responsible for processing enough lead time to set up the deduction correctly.
4. Calculate against disposable earnings. Apply the correct percentage limit for the garnishment type, based on the employee's disposable pay.
5. Withhold and remit by the deadline. Send payment to the designated agency or creditor by the required date, regardless of whether the employee agrees with the order. A payroll calendar can help you track remittance deadlines alongside regular pay dates.
6. Stop and document upon release. You'll typically receive Form 668-D for a released federal levy, a notice or letter from the state for child support, or a "Notice of Termination/Release of Wage Garnishment Order" for creditor garnishments.

Following these steps helps protect your business from legal repercussions and potential penalties for failing to respond to a garnishment order.

Building a Compliance Plan

It helps to have a basic understanding of garnishments and a plan in place before an order arrives. Consider working with a knowledgeable professional, such as an HR advisor or employment attorney, to confirm a garnishment plan and follow procedures that comply with applicable federal and state law. Payroll automation can help you apply the correct percentage and deadline to each order consistently, which lowers your chance of a manual error turning into a compliance issue.