A wage assignment is a deduction from an employee’s pay, which may be used to pay off debts, or to pay child or spousal support. Some loans stipulate to a wage assignment should they fail to make prompt payments to pay off the loan. In this case, if the loan is not repaid, money is deducted from an employee’s paycheck, either a specific sum or a percentage of earnings to collect debts owed.
There are two wage assignment types. One is voluntary, when an employee specifically asks his or her employer to deduct a portion of his/her wages to be paid to a designated third party. This is often easier for people than remembering to write important checks for loans or child support, or for things like payments of back taxes. The voluntary wage assignment tends not to reflect poorly on the employee, since it shows the employee is making a true effort to repay a loan or to honor financial obligations to others.
The second type of wage assignment is involuntary. It can also be called wage garnishment. This second type may occur when a person refuses to pay debts or agreed upon payments to a third party. Wage assignments of this second type may need to be honored by employers and may be requested by court order. Again, amounts can vary depending upon the financial obligations of the employee. Some wage assignments that are involuntary take a percentage of a paycheck, almost all of the paycheck, or a set amount. If an employee’s earnings increase or decrease, third parties may receive more or less money when the assignment is based on percentage.
If you do have to make a set payment, such as child support, creating a voluntary wage assignment is not a bad way to go. An involuntary assignment or garnishing of the paycheck suggests you may not be trustworthy or be able to live up to your obligations. It implies, even when this is not the case, that you have specifically resisted paying your debts, or worse, paying child support or spousal support. This can reflect on the employee’s character and might determine your future in a company.
Some individuals, if they have lots of debt, may have more than one wage assignment on a paycheck. Governments usually set a priority of which debts must be first addressed. If there is adequate money to cover all debt, the employee may still be able to make voluntary wage assignments, though some employers do charge for this extra service. When the assignment is involuntary, generally companies must comply with any mandated assignments, in the order in which the government determines. Where there is one income supporting a person, the wage assignment usually can’t remove all the money you make. Most assignments have to allow an employee to collect a subsistence income, unless that employee voluntarily assigns his/her wages in a different manner.