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HR Tip – Deductions from wages for scooter loan


These questions are being answered by Learn HR, a market leader in the provision of HR and payroll training and nationally-recognised professional qualifications.

Q: The boss has agreed to give an employee a loan to buy a motor scooter because he says he has difficulty getting to work. The loan is to be repaid by regular deductions from wages. Personally I suspect that he may take the money and then leave us. How can I be sure to get the money back lawfully? What if he refuses to repay?

A: First, make sure that the employee signs a note acknowledging the loan and agreeing to have it repaid by deductions from wages.

Second, include in the note a statement that, should he leave your employment before the loan is fully repaid, he agrees that the outstanding balance will be recovered in full by deduction from wages.

If you make any deductions from wages other than those required by law without the express written permission of the employee, the deduction will be unlawful. Therefore, if the employee does take the money and run and you have omitted to cover yourself for the outstanding debt as indicated in the second point above, you will not be entitled to deduct it from final wages. If you do so, a court would require you to repay the money deducted and, worse, since it would then be classed as an unlawful deduction, you would not be able to recover it in any other way.

If you find yourself with an outstanding debt, ask the employee to repay it and, if he refuses, sue him in the County Court. The process is quite simple and court staff will give you an explanatory pack. Point out to the employee that he is certain to lose his case, will be required to repay the money and moreover will then find it difficult to get credit.

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