Wage Garnishment

It is a legal process where an employer has to withhold a specified part of the employee’s salary to settle the debts they own. This process initially includes a wage garnishment notice served to the employee, which reflects the details of the required deductions

The amount is already fixed by the Consumer Credit Protection Act, which states that if the employee gets fired he or she is responsible for paying only one debt. This dept applies to the personal earnings such as wages, salary, commission, bonuses and pensions.

Here is a detailed description of the process that wage garnishment process:

• The creditor opts for a court order and follows an appropriate legal order

• The employee and employer receive the garnishment order from the court

• Based on the federal law and state law, the employer then calculates the amount that needs to withhold

• The specified amount is then deducted from the salary of the employee

• Then the employer sends the garnished amount to the creditor

Types of debt which can lead to Wage Garnishment

• Child alimony
• Student loan
• Consumer debts
• Court judgement
• Unpaid taxes

Impact of wage garnishment?

For employer

• Results in administrative burdens and multiple tracking
• Increasing the payroll management costing
• Hinders the work dynamics due to employee stress
• The liability is all on the employer if the garnishment is not executed effectively

For employee

• Financial losses as it reduces the take-home money
• Reduces job satisfaction due to psychological stress
• Degrades personal and professional relationships
• Negative impact on the credit score of the employee

With the help of offering a counselling service and financial wellness program to the employee, the employer can mitigate challenges due to wage garnishment. Other than this, the help in establishing clear policies regarding wage garnishment handling can also assure fair treatment and a positive work environment.

Limits of Wage garnishment

The amount of wage garnishment process crucially depends upon the federal guidelines and types of debt an employee is into. At the time when federal law sets a general limit, various debts allow a high level of garnishment and according to state laws, there is a strict limit for additional charges. Here is a summary of garnishment limits as per the type of debt:

The term disposed of income refers to the earning of the employee after essential deductions like taxes and social security amounts. State law sets lower limits and also offers various protections to the employee.