Redundancy & Loan

[Gunwoody]

Good afternoon,

I'm in the final stages of being made redundant (not voluntarily). I had a loan with the company and my employer is now looking to recoup this loan by way of a deduction from my redundancy - is this acceptable, and more importantly legal?

I don't dispute the loan but it will be hard for me to survive if my small redundancy package is reduced by this deduction. I don't have an official loan agreement, just a simple letter. The only clause referring to repayment in full is this:

QUOTE " Should you leave the employment of the company at any time then the outstanding balance at that time would need to be immediately settled."

Any advice would be gratefully received.

Thanks
Mike

[ULA]

So the letter I presume sets out the terms of the loan, the repayments and this clause about settling in full on leaving the company. The quote that you stated clearly sets out the terms upon which the company would expect the balance to be repaid in full on leaving the company.

Is there a general clause in your contract about dedution from final salary of any monies that are owed to the company?

[Gunwoody]

Hi ULA,

Thanks for your reply. Yes, the letter sets out the basics, the principal amount, the repayment period and the monthly repayment. My main issue I have is with the implied term for the balance repayment. There's nothing in my contract and I didn't even receive a contract until this year - 3 years after starting my employment.

It's reasonable to interpret this [the quoted statement] as the balance should be repaid on demand should 'I' choose to leave the company NOT if the company and its redundancy process force this upon me. I believe this is unfair and would expect it to be unenforceable.

If I did not leave I would repay the loan normally over time.

[ULA]

I apprecite your comment about the fact that you are not choosing to leave.

The other issue for your employer, as I see it, is that your redundancy pay I presume is purely the statutory payment, they are not making any further contractual redundancy payment. If that is the case then since your redundancy pay is a statutory payment, that you are entitled to by law, I am not sure that they can deduct the outstanding balance of the loan from this specific part of the payment.

I suggest that you go to your employer on this basis and request an agreement to a payment plan that you would need to adhere to post employment. If you can get to some form of agreement then this may be the best solution, however you will need to keep up the repayments otherwise your by then ex-employer could take you to court to recover the outstanding balance potentially with interest.

[Gunwoody]

Hi ULA,

They may not be able to deduct from a statutory payment but they could, I assume deduct it from holiday pay or notice. As i said i'm not looking to avoid this but I do want to be able to point out the fact that THEY have chosen this position by dint of the redundancy. I have no choice in the matter and no recourse.

[ULA]

Yes they could potentially deduct from non statutory payments. I appreciate you are not looking to avoid repayment but I suggest you do speak to the company about the fact they should not be deducting from statutory payments and therefore you want to agree a post employment repayment plan.