The order is a legal command, not a request

A wage garnishment order arrives from a court, a state child-support agency, or the IRS, and it does something uncomfortable: it makes your business the unpaid collection agent for someone else's debt. You did not choose this, but you are now legally on the hook. If you ignore the order, withhold too little, or hand the money to the wrong party, the liability shifts to you — in many cases you can be forced to pay the full judgment out of company funds. Garnishments are one of the few payroll events where the employer's own money is at risk, so they deserve real process, not a scramble.

The good news is that garnishment processing is rule-bound and predictable. Once you know the four questions every order raises — how much, how fast, in what priority, and how to protect the employee — you can handle almost any order that lands.

Know the type, because the rules differ sharply

"Garnishment" is a bucket that holds several very different animals, each with its own math:

  • Child support (income withholding orders). The most common garnishment by far, issued on a standardized federal form (the IWO). These get the highest priority and the highest withholding caps of any garnishment.
  • Federal tax levies (IRS). The IRS sends Form 668-W. Unlike most garnishments, the levy leaves the employee a fixed exempt amount based on filing status and dependents, and takes essentially everything above it.
  • Student loan and other federal debt (administrative wage garnishment). Federal agencies can garnish without a court judgment, generally capped at 15% of disposable income.
  • Creditor garnishments (judgments). A private creditor who won a lawsuit — a credit card issuer, a medical debt buyer — garnishes under a court writ, subject to the ordinary federal cap.
  • State tax levies and bankruptcy orders. These follow their own state or court rules and can reorder the priority above.

Misidentifying the type is the first and most expensive mistake, because it drives every number that follows.

The federal cap: start with "disposable earnings"

The Consumer Credit Protection Act (CCPA), enforced by the U.S. Department of Labor, sets a federal ceiling on how much you can take. The calculation always starts from disposable earnings, which is not gross pay and not net pay. Disposable earnings = gross pay minus the deductions required by law — federal, state, and local taxes, and mandatory contributions like Social Security. Voluntary deductions (health insurance, 401(k), union dues) are not subtracted; you do not get to shrink the garnishable base with elective withholdings.

From disposable earnings, the ordinary creditor-garnishment cap is the lesser of:

  • 25% of disposable earnings, or
  • the amount by which disposable earnings exceed 30 times the federal minimum wage for the week.

The second prong is a floor protecting low-wage workers: below a certain weekly income, nothing can be garnished by an ordinary creditor at all. Child support and tax levies use higher caps — child-support withholding can reach 50% to 65% of disposable earnings depending on whether the employee supports another family and how far behind they are. And several states cap garnishment more tightly than federal law (a few prohibit most creditor garnishment entirely). You must apply whichever limit leaves the employee with more pay — federal law sets a floor of protection that states can raise but not lower.

Priority when multiple orders compete

When two or more orders hit the same paycheck and there is not enough garnishable income to satisfy all of them, priority is not first-come-first-served by default. The general ordering:

  1. Child support almost always comes first.
  2. Federal tax levies generally come next — but a levy that arrives after a child-support order usually yields to that existing order.
  3. Bankruptcy orders, state tax levies, and creditor garnishments fill in behind, subject to their own rules.

Because a second creditor garnishment often cannot be honored at all until the first is satisfied (the 25% cap is not per-order — it is a total ceiling), you must track the sequence and the remaining balance on each order carefully. This is exactly the kind of state you do not want living in a manager's inbox; it belongs in your payroll and records system with dates, balances, and the answering paperwork attached.

The steps that keep you out of trouble

Every order should run the same disciplined loop:

  1. Log the receipt date immediately. Most orders start a short clock — often you must begin withholding by the next pay period and, for child support, remit within a handful of days of each payday. Late starts create employer liability.
  2. Return the answer/acknowledgment. Many orders (creditor writs especially) include an answer form the employer must complete and return, stating whether the person is employed and what will be withheld. Missing this deadline is a common way employers accidentally become liable for the whole debt.
  3. Calculate against disposable earnings and the correct cap — not gross, not net, and using the higher of the state or federal protection.
  4. Withhold and remit to the party named in the order, never to the employee and never to the creditor's collector unless the order directs it. Keep proof of each remittance.
  5. Notify the employee. Most orders require you to give the worker a copy and, for federal levies, a form to claim exemptions. Do this promptly — it is both a legal step and a matter of basic fairness.
  6. Stop on time. When the balance is satisfied or the order is released, stop withholding. Over-collecting creates its own liability.

The rule people forget: you cannot punish the employee

Federal law flatly prohibits firing an employee because of a single garnishment. The CCPA protects a worker from discharge over one debt, and violating it exposes you to reinstatement, back pay, and penalties. Some states extend the protection to multiple garnishments. Whatever your private feelings about an employee's finances, the garnishment is not a performance issue and cannot be treated as one — do not let it color reviews, assignments, or offboarding decisions.

There is also an administrative fee most states let you keep — a small per-payment amount (often a few dollars) you may deduct to offset your processing cost. It will never cover the real cost of doing this right, but take it where allowed and apply it consistently.

Handle it with discretion

A garnishment is deeply personal information. Restrict who sees the order, keep it out of general personnel gossip, and store it with the same access controls you apply to other sensitive payroll data. Treating the process as routine and confidential protects the employee's dignity and your exposure to a retaliation or privacy claim at the same time — the same instinct that makes a good employee handbook worth having is the one that tells you a wage order is nobody else's business.

The bottom line

A garnishment order turns your payroll into a fiduciary for someone else's obligation, and it puts your company's money at risk if you get it wrong. Identify the type, calculate from disposable earnings against the higher of the state or federal cap, honor priority when orders compete, answer the paperwork on time, remit to the named party, and — above all — never retaliate. Build it into a repeatable payroll step rather than a fire drill, and a garnishment becomes a routine deduction instead of a liability landmine.

This is general guidance on processing wage garnishments, not legal or tax advice. Garnishment caps, priority rules, employer answer deadlines, permissible administrative fees, and anti-retaliation protections vary by state and by order type and change over time — confirm the specifics of any order with your payroll provider or an employment attorney before you withhold or remit.