Employee wages may be garnished for a variety of reason. The Payroll department must understand all the rules related to withholding garnishments including knowing the priority for each type of garnishment. Garnishment priority is:
1. Child Support
2. Federal tax levy
3. State tax levy
4. Local tax levy
5. Creditor garnishments
6. Employer deductions
7. Employee voluntary deductions
This article explains the basic calculation to determine the amount available for creditor garnishments for an employee.
Subtract from the employee’s gross pay all legally required deductions (i.e. taxes). Note: do not subtract voluntary deductions. The result is disposable pay.
Multiply disposable pay by 25%
Multiply the current federal minimum wage by 30. If your pay period is other than weekly, annualize this amount by multiplying it by 52 and then dividing by the number of pay periods you have per year.
Subtract your total in step 3 from disposable pay (which you calculated in step 1)
The amount available for all garnishments is the lesser of your results in steps 2 and 4
Subtract any existing garnishments for child support and federal, state or local tax levies. The result is the amount available for creditor garnishments. If the result is zero or less, you cannot withhold anything for the creditor garnishment
• This is only a guideline. It is your responsibliity to understand the federal and state requirements for calculating disposable pay.
• This procedure follows federal law, check the garnishment laws in your state as your state may have different withholding maximums.
• Read the withholding order you received and follow the instructions on it carefully. If it contradicts this article, the withholding order takes precedence.