Fee for service: Who pays? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Fee for service: Who pays?

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in Office Management,Payroll Management

Question: Some of our Illinois employees have taken out payday loans and now expect the Payroll department to set up a payroll deduction to repay the loans. Payroll feels very strongly that we aren’t employees’ financial managers and that employees should take care of their own debts. We’d like to discourage this behavior by charging these employees a fee for servicing these loans. Can we?

Answer: You may, provided these agreements are voluntary wage assignments. Illinois law allows employers to charge $12 for each wage assignment. The fee must be credited against the employee’s outstanding debt.

However, you must make sure that the employees have actually signed voluntary wage assignment agreements. Valid wage assignments are written, dated, show employees’ Social Security numbers, the employer’s name, the amount borrowed and the interest rate. In addition, the words “Wage Assignment” must be written in bold-face letters at the top of the assignment.

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