Ask HR: Terminated with loan balanced owed. Can I collect?

askHRDear HR,askHR

I recently terminated an employee. I personally loaned the employee $500, of which $300 is still owed. Can I deduct the balance owed from the final paycheck?



An Employer may make a deduction from a final paycheck for a cash loan to an employee ONLY IF the employee has voluntarily signed a loan agreement, and the loan was for the employee’s sole benefit.

The deduction may not exceed 25{0c2d428c3cefef4a77c472786cabf3d957ca1c1fde265c02f19cd1ec2d7db907} of the employee’s disposable earning* OR the amount of disposable earning in excess of $218 per week whichever is less.

*Disposable earnings are generally net earning after tax deductions and family support withholdings.


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