Legal Definitions - assignment of wages

Assignment of wages refers to a legal agreement where an employee voluntarily transfers their right to receive a portion of their future earnings directly to a third party. This means the employer, instead of paying the full amount to the employee, is authorized to deduct a specified sum from the employee's paycheck and send it directly to the designated third party. This arrangement is typically made to fulfill a financial obligation or to facilitate regular contributions to a specific account or organization.

• Example 1: Loan Repayment

  Sarah takes out a personal loan from a credit union. To ensure consistent and timely repayments, she signs an assignment of wages agreement. This agreement authorizes her employer to deduct $150 from each of her bi-weekly paychecks and send that amount directly to the credit union until the loan is fully repaid. This arrangement benefits both Sarah, by automating her payments, and the credit union, by guaranteeing a steady stream of repayment funds.

• Example 2: College Savings Plan Contributions

  Mark wants to consistently contribute to a specific college savings plan for his child, which is managed by an external financial institution. He completes an assignment of wages form with his employer's payroll department. This form directs his employer to deduct $200 from his monthly salary and remit it directly to the college savings plan administrator. This ensures regular contributions without Mark needing to manually initiate transfers each month.

• Example 3: Professional Association Dues

  A group of engineers joins a professional engineering association that requires monthly dues. To simplify the payment process, the engineers sign an assignment of wages form with their employer. This authorizes the employer to deduct the monthly dues directly from their paychecks and send the collective amount to the professional association. This streamlines the collection of dues for the association and makes it convenient for the members.