A worker is asking us for a loan: How can we set up a legal repayment plan? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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A worker is asking us for a loan: How can we set up a legal repayment plan?

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Q. An employee wants to borrow $2,000 from the company to cover a family emergency, and we’re willing to make the loan. How should we structure the loan and repayment terms so we can deduct a certain amount from the employee’s bimonthly paycheck? We also want to be able to deduct the balance of the loan from the employee’s final paycheck in the event he is terminated before completely repaying the loan.

A. Minnesota law normally prohibits deductions from employees’ paychecks without their permission. However, there’s an exception: When an employee—voluntarily, in advance and in writing—authorizes that the cost of the purchase or loan from the employer can be deducted from the employee’s wages at regular intervals or upon termination of employment.

Before you make the loan to this employee, make sure you have an agreement in writing signed by the employee stating that the agreed upon amounts may be deducted at regular intervals from his paychecks and that any unpaid balance of the loan at the termination of his employment will be deducted from his final paycheck.

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