Contract Employee Loan Recovery: How Do You Handle Unpaid Balances When They Leave Early?

Our industries want to help our contract employees by providing loans in case of a medical emergency and housing loans, but the recovery of the loans is the issue. If a contract employee leaves before completing the loan amount, how can we recover the remaining amount from the contract employee? Does anyone have any legal drafts or documents that we can use to recover from the employee or their guarantor?

Can anyone provide the aforementioned drafts or documents?

Hi,

First of all, for the sanctioning of company loans for medical emergencies or housing, formulate some criteria such as the minimum period an employee should have worked, etc. Also, set a ceiling for the loan amount based on the employee's salary.

Finally, execute the loan agreement on stamp paper. Stamp papers are mandatory for money borrowing agreements. Any documents used for legal purposes must be executed on stamp paper to make them valid. You can also collect post-dated cheques as a guarantee, which can be mentioned in the stamp paper.

Despite the above arrangements, some cases involve absconding without making payments, and the legal process can be time-consuming. Therefore, make the loan release process more stringent.

Require a little more clarification about "contract employees."

Understanding Contract Employees

Whether they are working under a contractor, or whether the company (principal employer) hired them directly under a fixed-term contract, whose wages/salary payment, etc., are directly managed by the company (principal employer).

Recovering Unpaid Loan Amounts from Employees

Unrecovered amounts can be adjusted from the payment (salary and wages) that remains outstanding with the employer, as well as from the amount of full and final settlement (earned leave, bonus, etc.). The employer should maintain a register of advances or keep advance payment vouchers as proof of payment.