How Can I Safely Advance Money to an Employee for a House Purchase?

Dear Member,

One of my employees wants to advance a sum of Rs. 50,000/- for purchasing a house. Presently, the said employee has a salary of Rs. 12,000 (approximately). I would like to know the process by which I can provide the requested amount to my employee, and I also want to ensure my protection in case the employee denies refunding the amount in the future.

Thank you in advance.

Dear Anirban,

What he is asking for is a loan and not an advance, as an advance is generally recovered in one shot (given his salary is 12000, this is not possible). Normally, a loan is given as a maximum of 2 salaries, so the recovery can be done easily.

You will need to prepare a loan form for the employee to fill out, sign, and also ask him to provide 2 sureties who are working with you and who will pay the loan if the person absconds.

Regards,
Ashutosh Thakre

To secure your interests, please follow the formats required as per the Payment of Wages Act and the applicable rules of your state.

Dear Anirban,

Please ensure that the employee's total deduction in the salary slip does not exceed 50% of the total gross salary every month, as per the rules mentioned in the Payment of Wages Act. You need to calculate the monthly EMI for the loan you have provided, along with other deductions like PF, ESI, PT, etc.