The Payroll Book

CHAPTER 4Deductions

VOLUNTARY DEDUCTIONS

An employee can voluntarily agree to wage deductions that must be implemented by the payroll department. These deductions may include wage assignments to repay a debt, charitable deductions, wages withheld to purchase US savings bonds, credit union loan repayments, and so forth.

Wage Assignments

A wage assignment is a voluntary agreement by an employee (assignor) to have a portion of the employee's wages assigned to a third party (assignee). Generally, employees assign wages to secure a debt. The assignment gives the creditor an opportunity to recover the unpaid amount if the employee fails to repay the debt.

A wage assignment also allows both the third party and the employee to avoid the time and expense connected with court-run garnishment proceedings. Wholesale or retail outlets that allow customers to pay for merchandise in installments will sometimes ask the customer to enter into a wage assignment agreement as a manner of guaranteeing payment. Assignments are also used to secure loans from financial institutions.

Sometimes an assignment will be used to pay the debt directly rather than waiting for the employee to default. And in some cases, noncustodial parents may be allowed to voluntarily assign a portion of their wages to pay child support rather than having to submit to a child support withholding order.

Garnishment Limits Do Not Apply

Voluntary wage assignments are not covered by the Consumer Credit Protection Act (CCPA), ...