Loaning money to an employee

Never loan money to an employee. The slave/master relationship with loans is too much when your already in supervision of someone. If others find out there can be a fairness issue too. Why didn’t you offer to loan me money? Or I’m on hard times too.

If you want to gift him money and you honestly think it’ll help then do it on the side as a friend helping a friend.

If the guy is good at his job and his performance is above his pay grade as you seemed to indicate give him a raise. Not because he’s on hard times but because he’s proven his worth and earns his keep. Sounds like the kind of guy you may want to keep around and incentivise hard work.

Lots of places do advances on salary. Google it to learn more.

One thing I'd ask is whether these "tough times" were of his own making, i.e. he had a lapse in judgment. Usually that's the case.

I would not do it. However, if you choose to do so, you can call it a loan to him but know in your mind it is a gift, because once you lend money out there is a good chance it might not return.

Before I'd do anything to help I'd want to know two things:

1) Were his "tough times" caused by a lapse in judgement or self-control on his part or by something out of his control, like an unexpected medical issue or property damage that he couldn't prevent?

2) If he contributed to the "tough times" what has he done to keep it from happening again?

Without a satisfactory answer to both the above questions, I'd do nothing to help him.

If he has a reasonable answer to both the questions, I'd consider a pay advance which he would repay via payroll deduction each pay period with the option he could pay it off in a lump sum anytime. I wouldn't charge interest.

A second option would be to help him get a personal loan through a bank or credit union and I'd consider being a co-signer on his loan knowing that I might have to pay off the entire loan myself.

quote:

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So I have an employee who is a bit on tough times and it’s beginning to affect his performance. I’m willing to help him out but I don’t know the right way to do it. I honestly would have no issues paying him more but it’s not really in the cards. I can either give him a loan or gift him the money. If I loan it to him it gives him a clear means to pay me back. If I gift it to him, he’ll feel obligated to repay me in some way. Anyone go through this before? Any of the stories end in a positive outcome?

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A loan is a bad idea IMHO, there are only 3 outcomes and two of them are bad. Honestly if he can't pay his bills how is he going to pay them AND you?

If he is worth it simply pay him a bit more and let him sort the loan elsewhere, if he stiffs them you two will have no hard feelings.

We have loaned money to employees in the past that needed it and just took it off their next paycheck or paychecks depending on the amount of the loan. When we give them the money we have them sign our “loan” paperwork that goes over how the repayment will be handled.