July 24, 2009
Question of the Week: How Are Wage Garnishments Affected by the Increase in the Minimum Wage?
Filed under: News
Vision Payroll

This week’s question comes from Amy, an HR manager. Several of our employees have wage garnishments that are limited based on their earnings. How are wage garnishments affected by the increase in the minimum wage? Answer: A wage garnishment is when an employer, generally as a result of a court order, withholds an amount from an employee’s earnings in payment of a debt. Restrictions on wage garnishments are defined in Title III of the Consumer Credit Protection Act. §303 of Title III restricts the amount of most garnishments to the lesser of 25% of the employee’s “disposable earnings” or the amount by which the employee’s disposable earnings exceed 30 times the Federal minimum wage. Disposable earnings for this purpose generally means gross wages less deductions required by law. Voluntary deductions not required by law are not included in the calculation of disposable earnings. With today’s increase in the federal minimum wage, the calculation of the maximum garnishment amount has changed. For employees with disposable earnings greater than $290.00 ($7.25 X 40), a maximum of 25% can be garnished. For employees with disposable earnings less than $290.00 but more than $217.50 ($7.25 X 30), the garnishment equals the amount by which disposable earnings exceed $217.50. For employees with disposable earnings of $217.50 or less, no garnishment is allowed. There are exceptions for child support, alimony, certain bankruptcy court orders, and debts for federal and state taxes. A state law that allows a smaller garnishment takes precedence over the federal law. There are also different calculations for some other debts owed to the federal government and its agencies. Contact Vision Payroll if you have any questions on calculating the correct amount of garnishments on employee’s wages.


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