How to Handle Employee Loan Agreements: What Documents Are Needed for Recovery?

Hi,

We are a construction company, and our management has decided to provide a loan of Rs. 1,00,000/- (one lakh) to one of our employees whose brother is hospitalized. He has requested us to deduct his salary, which is around 22k. We plan to deduct only 18k as he receives other income as well.

Could someone assist me in executing this agreement and inform me about the original documents we need to retain until he repays the loan? If possible, please send me a copy of the agreement via email at punidha@vsnl.net.

Thank you in advance.

Nitu

Dear,

Do not deduct from his salary. Deduct only one-fifth of his salary, which will look credible. After crediting to his account, get monthly post-dated cheques for repayment in the Director's personal account advanced as a loan to him. If Rs 18,000/- is deducted, what will he have to survive?

With Regards,

V. Sounder Rajan

Hi Nitu,

It is not legally feasible to deduct more than 50% of the salary, as this is restricted by the Payment of Wages Act. Therefore, it is better to obtain a post-dated cheque from the employee for the amount he has borrowed.

Recovering the amount becomes easier when you have a person's cheque. If the cheque bounces, it amounts to a criminal case.

Regards,
Suresh Ramalingam

Dear Sundar Raj and Ramalingam,

Thank you so much for your feedback. The deduction amount has been decided by the employee only. He gets 5k as a voucher payment apart from his salary. The company has provided him with accommodation, and food has been taken care of.

I just want to check if we need to execute any agreement. If yes, would any copies be available?

Regards,
Nitu