Employers receive garnishment orders for child support, federal and state tax levies, student loans, bankruptcy and ordinary creditor debts. Federal law (the Consumer Credit Protection Act, 15 U.S.C. §1673) limits ordinary garnishments to the lesser of 25% of disposable earnings or the amount by which weekly disposable earnings exceed 30 times the federal minimum wage. Child support can take 50% to 65% depending on the employee’s circumstances. Orders have a priority, and support usually comes first.
Why it matters
Getting the priority or limit wrong exposes the employer to liability for the amount that should have been withheld. Field employees with several orders are common.
Worked example
Disposable earnings $1,000 a week. A child support order for $400 (50% cap, $500) is withheld in full. A creditor garnishment gets $0, because support already exceeds the 25% ordinary limit of $250. If support were $150, the creditor would get $100 (illustrative).
Common mistakes
- Applying the 25% limit to gross pay instead of disposable earnings.
- Withholding creditor garnishments ahead of support.
How os.construction handles it
The payroll model in the accounting preview applies order priority and federal limits per check and posts each amount to a garnishments payable account. Order intake is Planned. See Payroll.