Employer borrowing money(wages) from employees

Russe11

For what ever reason the business needs to borrow money.

Often wages are held back from employee, not that they have much choice if the money is not there.

In reason the employer is able to borrow money interest free from their employees and then pay it at a later date.

But the employee can not borrow money interest free therefore its seen fit to charge some sort of interest on the money owed.

What rate do you lend at? what the employee can borrow at themselves? If the business was able to borrow at market rates then they should and just pay the employees, so it should be higher than a highstreet bank loan? What other factor do you add in? Do you charge interest up till the day the back payments are cleared? or do you charge interest on a repayment basis like a repayment loan?

any suggestions welcome...

ah final thought is should the company go under then the loss is a loss, but should there be any thing left to salvage then it would be calculated at 8% from the date owed to the date paid if the money was claimed through the courts plus costs.

zzzLazyDaisy

I am not sure that I understand the question.

The employees are entitled to be paid their wages. A failure to do so amounts to an unlawful deduction from wages and the employee would be entitled to ask the employment tribunal to intervene. The employer certainly doesn't have the right to with-hold wages by way of an informal loan, with or without interest.

If the company goes into liquidation owing the employees wages the employee can claim for all outstanding pay from the insolvency practitioner, but if there are insufficient funds that won't help the employee.

As full payment cannot be guaranteed, there are special arrangements for employees to claim the basic minimum of debts owed to them from the National Insurance Fund. These claims are:

• redundancy
• wages - up to a maximum of eight weeks
• holiday pay - up to a maximum of six weeks
• compensatory notice pay - one week after one calendar month's service rising to one week per year of service up to a maximum of 12 weeks (new earnings will be taken into account)

There is a limit of £380 a week (£400 a week from 1 February 2011) on the amount you can claim for your weekly pay.

BitterAndTwisted

What's the point of this question? An employer not paying their wages bill in full and keeping the money is theft. Or at least breach of contract. I wouldn't wasting my time trying to work out a hypothetical interest-rate I'd be looking for another job. And quick.

Russe11

The point is if the employee was happy and ok with it should they be be paid interest to compensate for late payment, what should the agreement involve?

Russe11

zzzLazyDaisy wrote: »

There is a limit of £380 a week (£400 a week from 1 February 2011) on the amount you can claim for your weekly pay.

how can that be fair, being below the average wage earned in this country?

Uncertain

Russe11 wrote: »

how can that be fair, being below the average wage earned in this country?

Given that it has to come from the taxpayer and is 100% more than the company's other creditors will get it seems fair(ish) to me!

zzzLazyDaisy

Russe11 wrote: »

how can that be fair, being below the average wage earned in this country?

It is a lot higher than the National Minimum Wage, which is also set by the government. I don't suppose that's 'fair' either. That's life.

zzzLazyDaisy

Russe11 wrote: »

The point is if the employee was happy and ok with it should they be be paid interest to compensate for late payment, what should the agreement involve?

If the employee is happy to give a loan to the employer, then the employee can set whatever terms he wishes, as long as the employer agrees to the terms.

Personally, if I worked for a company that couldn't afford to pay my wages and couldn't obtain a loan from more traditional sources, I definitely would not be lending it money from my own pocket. If the company goes down, you will have given up the protected position accorded to employees who are owed wages as this this would be an unpaid loan. Pursuing the debt through the courts would do you no good as you would be an ordinary unsecured creditor, coming after all the priority creditors and could well get nothing.

The government would not use taxpayers money to repay the debt on a loan in the same way that that unpaid wages are treated.

Russe11

thanks for the replies

DVardysShadow

Russe11 wrote: »

The point is if the employee was happy and ok with it should they be be paid interest to compensate for late payment, what should the agreement involve?

The employee should set his own rate of interest which he is happy with - and not lend if the employer does not accept.

But any employee who is bright enough to do this will probably see the writing on the wall for the employer.

Employers borrowing off employees by delaying wages ranks with alcoholic parents breaking open their kids' piggy banks.

Russe11

Its not the case that the employer is going under, its the way they operate unfortunately, they could do with more organisation and not being so laid back.

Other problem is that now its a month behind and over 5k it would not be a small claims case should it come to that.

Its not a limited company either so no problem with them liquidating.