If you need to deduct money from your employee's paycheck to account for a wage garnishment or other debt, you can add either a one-time deduction or an ongoing deduction that occurs every pay period.
Where the deducted money goes: deductions remain in your company bank account. If your company has multiple bank accounts set up, the money remains in the account you used to process that specific payroll.
This money will stay in your company bank account, and if you've been ordered to remit it to any agencies, that will be your responsibility. Keep in mind:
You can add one-time custom deductions while running a regular payroll. To do so:
Another way you can add a post-tax garnishment or deduction is from an employee's profile. Follow these steps:
The next time you run payroll, this amount will be deducted from your employee's wages post-tax. The deduction will be seen as a separate line item on the employee's paystub.
If you've received a wage garnishment notice or income withholding order and have questions about it, contact the agency that sent you the notice or your accounting professional for more information.
If a garnishment or deduction is no longer needed, follow these steps to stop deducting it from an employee's payroll.
Follow the steps below to set up post-tax deductions for an employee's child support wage garnishment.
When to remit payments to state agencies yourself
To remit a payment yourself, follow the instructions on the garnishment order or contact the agency directly for assistance.
When Gusto remits payments to state agencies for you
As long as the garnishment did not come from South Carolina, a tribal support agency, or a US territory, here's when Gusto will remit payments to the applicable state agency for you:
Add a deduction for a garnishment
Legal requirement: Federal rules indicate you may not withhold more than 50% of the disposable income if your employee is supporting another family, or 60% of the disposable income if your employee is not supporting another family. If your employee is behind in their child support payments (in "arrears") greater than 12 weeks, those limits can increase to 55% and 65%. Check the income withholding order to see if it indicates that your employee is in arrears for greater than 12 weeks. State maximum withholding requirements can vary from federal guidelines so contact the state directly for more information.
Duplicate or multiple orders
If you receive duplicate orders for an employee there may be additional steps required before taking any action in your Gusto account. In general, employers that receive a duplicate withholding order must continue to honor the first order received in addition to notifying the proper agencies and individuals. Scroll to "Duplicate or multiple child support orders" for more info.
Past-due payments (payments in arrears)
If a garnishment order states there is a 'payment in arrears' owed due to missed payments in the past, the agency will generally have already incorporated the past-due amount owed in their calculations of the 'Total Amount to Withhold' along with the employee's current child support liability.
If there are past due amounts owed outside of what is included in the "Total Amount to Withhold," reach out directly to the agency to determine the best method for making the past due payment on behalf of the employee.
A lump-sum payment is a one-time payment to an employee. Examples include bonuses, commissions, severance, and vacation payouts. For employees with active child support orders, some lump-sum payments may be subject to garnishment. Requirements vary by state and payment type, and Gusto does not automatically calculate these garnishments on bonuses and other lump-sum payments. Employers should confirm the garnishment amounts and verify with the child support agency. Learn more about lump-sum payments and state requirements here.
Dismissing or terminating an employee with a garnishment
Legal Requirement: If you dismiss an employee with a garnishment order for any reason, you are required by law to notify the agency of the dismissal immediately. State guidelines vary but it is recommended you contact the agency 5 days after you learn that an employee will terminate employment or within 5 days after termination, whichever occurs earlier.
This form from the U.S. Department of Health & Human Services is accepted as fulfillment of the termination requirements for some states but not all. States may require additional information or specific employer action. Check out our article on dismissing or terminating an employee with a garnishment for more info.
Reporting and viewing deductions
As an administrator you can view deductions in several ways:
Employees can view their deductions:
Gusto's deduction calculation
We'll use the information you entered from the withholding order and your employee's normal pay schedule to determine the per paycheck amount to be withheld. Learn more about Gusto's deduction calculation here.
Agency payment timeline
Garnishment payments are sent to most state agencies 2 business days after the check date of the applicable payroll. Alabama child support agency payments are made 5 business days after the check date.
Reversing a payroll with a child support garnishment
Garnishment payments are sent to agencies 2 business days after the check date of the applicable payroll. Once payment has been remitted, we cannot recoup the funds on your behalf. Please directly contact the agency for questions about how to do so and next steps.
If an additional payroll is run to correct for the reversed one, garnishment deductions will occur again if deductions are enabled within the payroll.
In addition to the usual payroll debits (net pay, taxes, reimbursements), all child support garnishments will be summed together and will appear as a separate debit and bank transaction line item in the company's bank account.
Employers must adhere to several requirements once a child support order has been issued. Your responsibilities may include:
Click here for the full list of requirements as outlined by the US Department of Health & Human Services.
Rehiring an employee with a garnishment
When rehiring an employee all previous garnishments will be deactivated and will need to be re-entered in the employee's profile per the issued court order. Notification of the rehire may be required by the state.
Injured employees with active garnishment orders
If an employee has been injured or is ill and unable to work, you should notify the court or agency that sent the withholding notice and provide the employee’s name and the name and address of any entity paying workers’ compensation or disability benefits.
If none of the benefits are being paid by the employer, the employer is usually not responsible for withholding. If you have questions about withholding responsibility, please reach out directly to the agency.
If you receive duplicate child support garnishment orders orders (the same child) for an employee there may be additional steps required before taking any action in your Gusto account.
Employers that receive a duplicate withholding order must:
Multiple garnishment orders
You may receive multiple orders pertaining to income withholding for an employee. If so, it is important to note that income withholding orders are not to be paid on a first-come, first-served basis.
Reminder: Gusto calculates the "Maximum Paycheck Percentage (MPP)" on a per garnishment basis, not the total amount garnished. As an example:
Sitaution: an employee has two garnishments, both with a MPP of 50%. Their disposable income after taxes is $2087.20.
Garnishment 1 deduction = $875
Garnishment 2 deduction = $925
Outcome: because both of these numbers are on their own less than 50% of the disposable income ($2087.20 / 2 = $1043.60), Gusto will withold the full deduction amount for each garnishment, totaling $1800 ($875 + $925).
If there is insufficient allowable disposable income to pay the full amount on all orders, employers must follow the allocation method of the employee's work state, or principal state of employment, to determine how much to pay on each order. A majority of states give priority to current child support orders but regulations may vary.
For specific questions about multiple garnishment orders received and how to allocate disposable income appropriately, please reach out to the agency in the employee’s work state.