Redundancy & Employee loan

Gunwoody

Hi all,

I had an employee loan from my employer that was set to run for 3 years. I was made redundant in Sept 2020 and after the consultancy period, the company said that whatever redundancy pay i would receive would have to be used to repay the balance of a loan the company had provided. I had paid more than half of the loan (via monthly salary deduction). I refused saying my redundancy and the loan were separate matters. The company conceded and paid my redundancy. They have now written to me to say I have to repay the balance in full. I have no contract (only a letter) with regards to the loan and my understanding is that as they (by making me redundant) had removed my ability to service the loan and therefore voided the agreement. I basically had no choice in the matter. Can anyone shed any light on the legal standing as I can't find anything specific. 

 

Many thanks

M

General_Grant

Gunwoody said:

Hi all,

I had an employee loan from my employer that was set to run for 3 years. I was made redundant in Sept 2020 and after the consultancy period, the company said that whatever redundancy pay i would receive would have to be used to repay the balance of a loan the company had provided. I had paid more than half of the loan (via monthly salary deduction). I refused saying my redundancy and the loan were separate matters. The company conceded and paid my redundancy. They have now written to me to say I have to repay the balance in full. I have no contract (only a letter) with regards to the loan and my understanding is that as they (by making me redundant) had removed my ability to service the loan and therefore voided the agreement. I basically had no choice in the matter. Can anyone shed any light on the legal standing as I can't find anything specific. 

 

Many thanks

M

You surely have some income - and, if not, knowing you were under an obligation to re-pay the loan, you should have set aside that sum from the amount you received as redundancy pay.

In no way does that "void the agreement".  You are still a debtor.

Thrugelmir

Contractual agreements don't get voided. Better to engage and agree a payment plan. Rather than incur additional costs if your ex-employer pursues other avenues in order to recover the money owed. 

Gunwoody

Hi Thrugelmir,
I'm sorry but i have to politely disagree. Contractual agreements can be both void and voidable if they do not contain the prescribed terms to make them enforceable. In my case, my employee loan was enforceable whilst i remained in the employ of the company and it was serviced by way of salary deduction - quite standard. However, as the enforced redundancy removed my ability to service the loan by way of the agreed method (salary deductions) and there were no terms in the agreement to say what would happen should the company make me redundant - I take that to mean it would no longer be enforceable.
I'm not saying i'm right - but it seems inequitable that they can now say 'pay the balance' after putting me in a situation where i couldn't pay.  

Gunwoody

@General_Grant - redundancy pay is there to provide for you while you hopefully obtain further employment - and is not a employer deductable payment. And just for your information, the redundancy paid was small statutory amount and so i was in no position to 'put aside' an amount to repay. If it had been a large amount i would have made that offer - in fact i stated that to the company at the time. 

Thrugelmir

Gunwoody said:

Hi Thrugelmir,
I'm sorry but i have to politely disagree. Contractual agreements can be both void and voidable if they do not contain the prescribed terms to make them enforceable. In my case, my employee loan was enforceable whilst i remained in the employ of the company and it was serviced by way of salary deduction - quite standard. However, as the enforced redundancy removed my ability to service the loan by way of the agreed method (salary deductions) and there were no terms in the agreement to say what would happen should the company make me redundant - I take that to mean it would no longer be enforceable.
I'm not saying i'm right - but it seems inequitable that they can now say 'pay the balance' after putting me in a situation where i couldn't pay.  

You'll need to present that argument in person to a judge. In my personal experience over the years recovery of staff loans through the courts as a last resort was highly effective. 

When I suggested a payment plan even a minimal amount paid by standing order every month may suffice. I've known 4 figure debts repaid at £5 - £10 a month. 

Gunwoody

Hi Thrugelmir...thanks for your reply.  I guess thats the thing I'm seeking to understand. Does my argument stand up to scrutiny. You would seem to imply it doesn't. Well it was worth asking.

Gunwoody

It's hard to believe debts of 4 figures paid back at £10 per month..that would mean decades of repayment. Do companies really accept that?

antonic

Gunwoody said:

It's hard to believe debts of 4 figures paid back at £10 per month..that would mean decades of repayment. Do companies really accept that?

They can do just to inconvenience the person making the payment ... wether its cost effective is another matter !

vacheron

antonic said:

Gunwoody said:

It's hard to believe debts of 4 figures paid back at £10 per month..that would mean decades of repayment. Do companies really accept that?

They can do just to inconvenience the person making the payment ... wether its cost effective is another matter !

I believe that the payment of a menial sum also serves as an ongoing acknowledgement of the loan on the part of the debtor and so keeps resetting the 6 year statue bar timer to zero.