wage assignment from

• Search Search Please fill out this field.

What Is a Wage Assignment?

How wage assignment works.

• Why Are Wage Assignments Voluntary?

Wage Garnishment

The bottom line.

• Credit & Debt
• Debt Management

Wage Assignment: What It Means, How It Works

A wage assignment is an agreement that a portion of your disposable income will go directly to your creditors. This option may be written into some loan agreements or you may seek it out to help pay down debt with minimal effort on your part.

Wage assignment is the act of taking money directly from an employee's paycheck in order to pay back a debt obligation. Such an automatic withholding plan may be used to pay back a variety of debt obligations, including back taxes, defaulted student loan debt, and both child and spousal support payments.

Key Takeaways

• A wage assignment takes funds directly from an employee's paycheck to pay back a debt.
• How wage assignments are regulated varies by state, with some states even allowing for voluntary child support agreements.
• A wage garnishment is an involuntary deduction and requires a court order.

Wage assignments are typically incurred for debts that have gone unpaid for a prolonged period of time. Employees may sometimes opt for a voluntary wage assignment to pay for things like union dues or to contribute to a retirement fund.

A wage assignment is processed as part of an employer's payroll procedure. The employee's paycheck is decreased by the amount of the assignment and noted on their pay stub.

A wage assignment is often a lender's last resort to receive repayment from a borrower who has previously failed to pay a debt obligation.

Wage assignments are a valuable tool for collecting unpaid debts, but unfortunately, they may be associated with abusive lending practices . If you're struggling with your debt, one of the best debt relief companies or credit counseling agencies may be able to help you get back on track before a wage assignment is incurred.

What Makes Wage Assignments Voluntary?

In a voluntary wage assignment, a worker essentially asks their employer to withhold a portion of their paycheck and send it to a creditor to pay off a debt. Loan agreements may sometimes include a voluntary wage assignment clause in their terms should the borrower default on their loan.

Payday lenders often include voluntary wage assignments into their loan agreements to better their chances of being repaid. Laws regarding wage assignments vary by state.

For example, in West Virginia, wage assignments are capped at 25% of a worker's take-home earnings, the employee and the employer must sign the agreement, and agreements must be renewed annually. Under Illinois law, a lender cannot resort to wage assignment until a debt is 40 days in default. The wage assignment cannot continue for more than three years, and the worker can stop the wage assignment at any time.

Involuntary wage deductions, known as wage garnishments , require a court order and are most likely to be employed to collect spousal and child support payments that have been ordered by a court. Wage garnishments may also be used to collect unpaid court fines or student loans that have been defaulted on.

Several states allow individuals to sign up for voluntary child support agreements. In such a case, both parents must agree to a plan. Once that happens, a voluntary wage assignment may begin. If a child support or welfare agency is involved, they would have to approve any plan.

How Long Can I Have a Wage Assignment?

Since wage assignments are voluntary, the length of time that you use one can vary. Some loans include a wage assignment agreement, so you'll have to check the language of your loan to determine your obligation. Each state also has its own regulations regarding wage assignments.

How Much of My Income Can Go to Wage Assignments?

Every state has its own regulations, but typically 15–25% of your disposable income can be designated for wage assignments.

Is Wage Garnishment the Same as Wage Assignment?

While they are similar, wage garnishment and assignment are not the same. Wage garnishment is an involuntary paycheck deduction, typically ordered to repay child support, student loans, tax debt, or bankruptcy. A wage assignment is voluntary and may be used to repay a consumer debt.

Wage assignments may be a useful tool to help you pay down a debt. Wage assignments are voluntary but they may be hidden in the fine print of some loan products, so read everything carefully before signing. Check the regulations in your state to determine if your wage assignment is revocable.

West Virginia Division of Labor. " Wage Payment and Collection (WPC) Act: Payroll Deductions and Wage Assignments ," Page 3.

Illinois General Assembly. " (740 ILCS 170/) Illinois Wage Assignment Act ."

U.S. Department of Labor. " Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III (CCPA) ."

Illinois Legal Aid. " Understanding Wage Assignment ."

Compare Personal Loan Rates with Our Partners at Fiona.com

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

I am looking for…

I need support for…

• Login or other general help
• Paycheck Protection Program

Insights to help ignite the power of your people

Search SPARK

Wage Assignments and Garnishments: What Finance Leaders Need to Know

• Print Spark Article

Wage assignments and garnishments practices: Here are three things finance leaders must internally audit.

Wage assignments and wage garnishments are not the same. Each reflects a different process subject to different applicable laws. While there is always potential for a DOL Wage and Hour Division audit, financial leaders should internally audit their own processes to ensure compliance and efficiency while minimizing stress and anxiety for the employer and the employee. Here are three things to consider when conducting those audits.

1. Compliance

Wage assignments and wage garnishments differ in many ways. In fact, a wage assignment is not a garnishment. A wage assignment is a voluntary agreement between the employee and creditor where an amount is withheld from the employee's paycheck to satisfy a debt owed to a third-party recipient, whereas under a wage garnishment, the amount withheld from the employee's check is typically obtained through a court order initiated by the creditor.

Adding to the compliance challenge, there are several different types of wage garnishments, often with differing rules for each. For example, child support, bankruptcy and student loans are all types of wage garnishments. Wage garnishments for child support obligations are substantially governed by state law, which varies state to state, whereas garnishments for a bankruptcy plan are governed by federal law and garnishments for student loan debts are governed by either state or federal law, depending on the financing.

2. Efficiency

Businesses must be able to confirm when wage garnishments are initiated, when they cease and when more than one applies and in what order. This is what can make these withholdings complex — and messy. By having trackable systems in place, efficiency can be achievable.

3. Minimizing Stress and Anxiety

According to Workforce , wage garnishments can affect employee morale. Having wages withheld from paychecks may be a negative employee experience, especially when the employer has to get involved. For employers that are preparing audit-ready workplaces, these organizations face their own stress by potentially facing liability for noncompliance with respect to wage garnishment withholdings.

Having prudent processes in place may not only help with compliance and efficiency for the employer, but can also help alleviate stress for both the employee and the employer.

Learn about the ADP SmartCompliance® Wage Garnishment Module .

Recommended for You

Tools & resources.

Take your organization to the next level with practical tools and resources that can help you work smarter.

Recommend a Topic

Is there a topic or business challenge you would like to see covered on SPARK?

Subscribe to SPARK

Stay in the know on the latest workforce trends and insights.

Your privacy is assured.

Is there a topic or business challenge you would like to see covered on SPARK? Please let us know by completing this form.

All submissions will be reviewed and considered for use in future SPARK articles.

Important: If you need ADP service or support, visit ADP.com/contact-us/customer-service  or call 1-844-227-5237.

Wage assignment and employers’ responsibilities

Tough economic times raise some tricky HR issues—for example, when an employee’s financial straits begin to affect his employer.

Must we honor a payday loan wage assignment?

Q. An employee borrowed money from a payday loan service at a very high interest rate that I feel is unfair. The payday loan service sent me a “wage assignment” notice and told me that our company must withhold money from his paychecks.  What is a wage assignment, and does our company actually have to honor it? A. A wage assignment is a document that allows a creditor to attach part of the employee’s wages if the employee fails to pay a specific debt. The creditor does not have to obtain a judgment in a court proceeding before requesting payment. Under the Illinois Wage Assignment Act (740 ILCS 170), private employers are obligated to honor a creditor’s properly served demand for a valid wage assignment, unless an employee presents a timely, valid , written defense to the wage assignment.

What constitutes a valid assignment?

Q. How can I tell if a wage assignment is valid? How long is it valid? A. A valid wage assignment document must have the words “Wage Assignment” printed or written in boldface letters of not less than ¼ inch in height at the head of the wage assignment and one inch above or below the line where the employee signs the assignment. The employee must have signed the document in person, and the document must show the date of execution, the employee’s Social Security number, the name of the employer at the time of execution, the amount of money loaned or the price of the articles sold or other consideration given, the rate of interest or time-price differential to be paid, if any, and the date on which such payments are due. A wage assignment is valid for no more than three years after the employee signs it and the employer’s name appears on it. If the employee changes jobs, the wage assignment is valid for two years, even though the new employer’s name does not appear on the assignment.

Handling wage assignments

Q. How does the wage assignment process start? A. Assuming that the wage assignment document complies with the formal requirements, the creditor must serve “demand to withhold” on the employer. The demand is valid only if:

The employee has defaulted on the debt secured by the assignment for more than 40 days, and the default has continued to the date of the demand.

The demand contains a correct statement of the amount the employee is in default, and the creditor provides an original or a photocopy of the assignment to the employer.

The creditor has served a “notice of intention to make the demand” upon the employee, with a copy to the employer, by registered or certified mail not less than 20 days before serving the demand.

Putting on the brakes

Q. Can an employee stop the wage assignment process? A. The employee does have a right to contest the demand. If an employee has a legal defense to the wage assignment, the employee may—within 20 days after receiving a notice of demand or within five days after the employer is served with the demand—notify the employer, in writing, of any defense to the wage assignment and send a copy of the written defense to the creditor by registered or certified mail.   As a result, the employee’s wages are not subject to a demand served by the creditor unless the employer receives a copy of a subsequent written agreement between the creditor and the employee authorizing such payments. Similarly, if the creditor receives a copy of the defense prior to serving its demand upon the employer, the creditor may not serve the demand upon the employer.  Whether the employee’s defense is legally valid is not an issue the employer must resolve. Instead, the employee and the creditor may attempt to reach another agreement or the creditor may simply bring a separate lawsuit against the employee to collect an outstanding debt. 

Calculating the wage assignment payment

Q. How much must the employer withhold—and when? A. The employer must begin payment to the creditor no sooner than five business days after service of such a demand.  The employer must withhold the lesser of:

15% of weekly gross wages

The amount by which the disposable earnings for a week (pay remaining after federal and state taxes, Social Security deductions and any other amounts required by law to be withheld, including required retirement contributions) exceed 45 times the federal minimum wage, unless a notice of defense is received within that five-day period.

The employer shall be paid a fee of $12 for each wage assignment. That $12 is credited against the debt.

WHAT TO READ NEXT