How to help an employee who is in debt and requesting a loan

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How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Fri Aug 23, 2019 9:00 pm

Question: What would you do?

My spouse had got an email request to lend an employee $4000. She states she is desperate and has no way to pay for needed car repairs or get her young children ready for school. She promises to pay back $ 200 a month (no mention of interest, or collateral). The husband, with a good trade, does not appear to work much and their home situation sounds complicated although we do not know the details and do not want to pry.

My spouse had given the employee a $1000 as a gift when her car was repossessed 6 months ago. Since then the employee had had a recurrent bout with cancer. (She missed almost no time for the chemo).She reports her eldest daughter was on her bank card and had overspent and my spouse had lent her $ 500 over the weekend a couple of weeks back and we were paid $ 240 back.

She has 4 children one of which is autistic and the two eldest children are working. We pay a living wage and good benefits. She works hard, is a good employee for the 1 1/2 years she has been with us. We would like to help and do right, but we do not offer personal loans to other excellent employees who have been with for many years and have not had any requests either.

My first try at a response is:

Dear Jane (Doe),

I feel really bad the kids are starting school and you have no money to buy them anything. I want to help, but work/personal loans are not an option. The company will pay for you and your husband for Dave Ramsey course. You can work over time up to 10 hour per week if you would elect to do so. You are vested $2500 in the 401 K and we will check to see what you can withdraw.

Spouse of Wildebeest.


My spouse would like to know what credit counselling services the Bogleheads would suggest,
is a Dave Ramsey course helpful.
If we would offer overtime to Jane Doe we are obliged to offer over time to other employees, which is not feasible.

Any suggestions?
The Golden Rule: One should treat others as one would like others to treat oneself.

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Re: How to help an employee who is in debt and requesting a loan

Post by Vanguard Fan 1367 » Fri Aug 23, 2019 9:14 pm

That is a tough one. In one case an employee asked for a loan and I said that if that employee would resign I would give them the money. And I gave them more than the loan requested. We found a better employee without the financial and other drama.

In another case I agreed to do a loan for an employee and thankfully this employee found another source for the money so the loan didn't happen.

I think Dave Ramsey courses can be helpful. Of course the employee needs to have a teachable spirit.

Having a husband or boyfriend around who doesn't work much has been a challenge for my business too with having wives and girlfriends trying to support him.

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Re: How to help an employee who is in debt and requesting a loan

Post by Ferdinand2014 » Fri Aug 23, 2019 9:18 pm

Dave Ramsey is excellent for getting out of debt and budgeting. Financial peace university and the total money makeover are excellent tools. His investment advice I am not a fan of. Giving a loan to a friend/family member/employee can create resentment and possibly ruin the relationship. If you choose to help it should be a gift if anything at all.
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Re: How to help an employee who is in debt and requesting a loan

Post by HomeStretch » Fri Aug 23, 2019 9:26 pm

Tough situation. Given that you have already helped out twice in the last 6 months and are faced with a 3rd request, this sounds like it’s going to be a recurring situation with this employee. Not sure I would want to deal with this workplace drama.

Your suggestions for a 401k withdrawal or to work overtime are good ones.

Hopefully this employee is not in a situation to perpetrate any business fraud out of desperation.

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Re: How to help an employee who is in debt and requesting a loan

Post by Grt2bOutdoors » Fri Aug 23, 2019 9:34 pm

I doubt Dave Ramsey is going to be of help here. Sounds like this worker has a very full plate on their hands. Good workers are hard to come by, but if you loan the money you will have a receivable balance of $4,260. Until the next time...

How much are you willing to extend/lose (potentially)?
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Re: How to help an employee who is in debt and requesting a loan

Post by togb » Fri Aug 23, 2019 9:37 pm

This is a tough situation, and tougher because your spouse has already crossed the line by making monetary gifts and loans. This blurs the line of employer, and perpetuates dependency beyond employer/employee. It's hard to unscramble eggs-- so you can't undo the fact that she's been allowed to share too much personal information and become comfortable asking for loans, that are not repaid.

You can change what you do going forward. No more loans, no financial gifts. And rethink the OT offer-- can you really project that you need 10 hours of OT each week? Or is this a gift in disguise?

If you feel compelled to help, then do a bit of research on appropriate services that are available in your community-- assistance programs through local government or area churches? As an employer there are risks in preferential treatment, and you're already at risk. If you wish to sponsor this person/family financially, suggest you sever the employment first. She certainly has problems-- but don't put your business at risk in the way you choose to help her.

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Re: How to help an employee who is in debt and requesting a loan

Post by OnTrack2020 » Fri Aug 23, 2019 9:39 pm

The car was repossessed, but is now looking for money for repairs to a car? Is it a different car?

I think putting in the comment about the Dave Ramsey course is absolutely not necessary. These types of situations just go from bad to worse. And, unfortunately, it doesn't take much to go from bad to worse. Cancer, four kids, car repair, and a child with autism. No amount of Dave Ramsey is going to fix this. :annoyed

What I would do is to offer to purchase some school supplies for the kids, or buy a gift certificate to Walmart for school supplies/clothing. Maybe the 401k loan to help fix the car?

Edited to add: I do like another poster who suggested community assistance such as churches, food banks, etc. They may be willing to guide her in the right direction. You might also be able to make some of those phone calls to see what is out there.
Last edited by OnTrack2020 on Fri Aug 23, 2019 9:52 pm, edited 2 times in total.

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Re: How to help an employee who is in debt and requesting a loan

Post by BillWalters » Fri Aug 23, 2019 9:43 pm

I would gift the money and make it clear no additional help is available.

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Re: How to help an employee who is in debt and requesting a loan

Post by Archimedes » Fri Aug 23, 2019 9:45 pm

If this is a highly valued employee who is not easily replaced, then you might consider a loan. If you have the means to lose the loan money, then given the circumstances, loaning the money might be reasonable under the difficult circumstances being faced.

I would first ask myself some additional questions. How will the other employees feel? Will this create tension among the workers and interfere with the culture or success of your business?

Our company has extended a loan to a struggling employee with a signed loan document and a payroll deduction for payback over a period of 9 months. But realize that when the home situation becomes more desperate, you could get stiffed.

Being kind and generous within your ability to do so is a virtue. At the same time, you may be crossing some boundaries of taking on too much responsibility for your employee.

I always frame a personal loan as a gift in my mind. If I get paid back, that’s great. If I don’t get paid back, that is ok because after all it was a gift.

Sending the employee to personal finance education could be helpful but also could be taken as an unwelcome, major insult. “You don’t understand the current extenuating circumstances that led to this struggle.”

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Re: How to help an employee who is in debt and requesting a loan

Post by Stinky » Fri Aug 23, 2019 9:47 pm

Vanguard Fan 1367 wrote:
Fri Aug 23, 2019 9:14 pm

I think Dave Ramsey courses can be helpful. Of course the employee needs to have a teachable spirit.
+1

Dave Ramsey often talks about people “being sick and tired of being sick and tired”. Until people reach the point of being sick and tired, they will not change.

I think that Dave Ramsey’s budgeting and money management advice is excellent. His investing advice, not so much.
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Re: How to help an employee who is in debt and requesting a loan

Post by Starfish » Fri Aug 23, 2019 9:49 pm

We went through a similar situation. I cannot give advice but prepare yourself for a continuous loan if you go this path.

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Re: How to help an employee who is in debt and requesting a loan

Post by Nate79 » Fri Aug 23, 2019 9:51 pm

I think offering anything with string attached that they attend the Dave Ramsey financial peace university to be a great idea and is in fact often his recommendation. This type of situation seems to be every other caller on the DR show and he can certainly help get their finances turned around. I would not give a penny unless they attend the class.

Sounds like the husband needs to work about double the hours.

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Re: How to help an employee who is in debt and requesting a loan

Post by Big Dog » Fri Aug 23, 2019 9:53 pm

Question: What would you do?
Sorry, but I would not continue to loan/gift them money. Besides the 401k hardship withdrawal and OT, you could offer to advance the next paycheck. But that just means zero dollars in the paycheck 2 weeks hence.

btw: I would exclude the first sentence of your draft and the "i want to help part' and the Dave Ramsey sent. (An employee would just respond, 'instead of paying $1k to Dave, can you just give it to me?')
Last edited by Big Dog on Fri Aug 23, 2019 9:57 pm, edited 1 time in total.

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Re: How to help an employee who is in debt and requesting a loan

Post by tooluser » Fri Aug 23, 2019 9:55 pm

I would direct the employee to as many charitable and government resources as I could think of. Sometimes larger employers have Employee Assistance Programs that can help with no attribution. The problem with helping is that help soon becomes an entitlement if the employee's head is not in the right place.

As a private business owner, or even a corporate manager, I would need to balance the well-being of the business against the well being of the employee. You can't let one employee drive the business, not even the CEO. If the employee is so valuable they cannot be let go or tolerated to leave, that's a failure of management.

I've seen multiple such failures in a corporate setting. We all should do our best for each other, but sometimes tough love is what's called for. Good fences make good neighbors.

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Re: How to help an employee who is in debt and requesting a loan

Post by arcticpineapplecorp. » Fri Aug 23, 2019 10:03 pm

just heard a podcast about an employer named Dasher who hires "economically fragile" people. The podcast link is below. One of the ideas they talked about was a matching plan where they'd contribute a certain amount so the person had an emergency fund set up with the help of the employer (because 40% of Americans don't have $400 in savings for an emergency). They also gave an example where the company was dealing with some lateness/difficulties with reliable transportation, etc. and found it made more sense to fill up an employee's flat tire rather than let the employee go (which is costly to retrain, rehire, etc.). So they try to approach situations with an eye on how to retain economically fragile folks despite the numerous challenges they bring to the workforce. She said Dasher has a 90% (or maybe it was 95%?) retention rate.

The CEO Sharon Ryan was promoting her book. Ryan co-wrote a book with Cynthia Tolsma called, The Talent Pool: How to Find and Keep Dedicated People While Making a Lasting Impact.

https://www.witf.org/smart-talk/2019/08 ... merica.php

maybe the book can provide some other ideas, or you can reach out to her with ideas for some strategies.
Last edited by arcticpineapplecorp. on Fri Aug 23, 2019 10:07 pm, edited 1 time in total.
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Fri Aug 23, 2019 10:05 pm

Vanguard Fan 1367 wrote:
Fri Aug 23, 2019 9:14 pm
That is a tough one. In one case an employee asked for a loan and I said that if that employee would resign I would give them the money. And I gave them more than the loan requested. We found a better employee without the financial and other drama.
Great advise, you set up good boundaries helping the individual and your business, unfortunately she will not be easy to replace and we already breached boundaries
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Re: How to help an employee who is in debt and requesting a loan

Post by 9-5 Suited » Fri Aug 23, 2019 10:06 pm

You guys are very kind. I would never give a loan to any friend, employee, or family member. It so rarely seems to be a one time event, as you are experiencing.

They need to figure this out on their own for the long-term. Getting bail outs from a dependent relationship helps put out the fire of the moment, but they need a decades long plan for change not a minutes long one.

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Re: How to help an employee who is in debt and requesting a loan

Post by fuddbogle » Fri Aug 23, 2019 10:07 pm

Is your company big enough to have a fleet of cars? I work for a private company (over 50M) and I could see them loaning a company car to the employee for specified period of time.

I’ve personally given 3k to a friend(10 years ago), who of course, who would pay me back over time. I’ve yet to see the first payment. :P I kinda of expected the end result.

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Re: How to help an employee who is in debt and requesting a loan

Post by 9-5 Suited » Fri Aug 23, 2019 10:10 pm

One other option I have seen is setting up a credit limit of sorts. You say “we will loan you $1,000, but no more loans whatsoever until that one is paid back.” And that becomes kind of a standing offer that limits your risk.

I don’t really like the idea personally, but it seemed better than most ideas if you actually want to engage in personal lending. Sets clear limits.

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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Fri Aug 23, 2019 10:12 pm

Ferdinand2014 wrote:
Fri Aug 23, 2019 9:18 pm
Dave Ramsey is excellent for getting out of debt and budgeting. Financial peace university and the total money makeover are excellent tools. His investment advice I am not a fan of. Giving a loan to a friend/family member/employee can create resentment and possibly ruin the relationship. If you choose to help it should be a gift if anything at all.
I agree.
I would prefer it to be a gift.
And make it clear that it is the last gift (I do not want to get another loan ( gift) request around Xmas).
The Golden Rule: One should treat others as one would like others to treat oneself.

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Re: How to help an employee who is in debt and requesting a loan

Post by orhkaf » Fri Aug 23, 2019 10:15 pm

Your wife isn't responsible for bailing them out. Their situation is self inflicted. If they didn't learn their lesson the first or second time they got in financial trouble, they wont learn it the third :oops: .

I would just frankly tell them that finances are tight for me at this time and I wont be able to help. Sorry.

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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Fri Aug 23, 2019 10:18 pm

HomeStretch wrote:
Fri Aug 23, 2019 9:26 pm
Tough situation. Given that you have already helped out twice in the last 6 months and are faced with a 3rd request, this sounds like it’s going to be a recurring situation with this employee. Not sure I would want to deal with this workplace drama.

Your suggestions for a 401k withdrawal or to work overtime are good ones.

Hopefully this employee is not in a situation to perpetrate any business fraud out of desperation.
Thanks for your thoughts,

I felt sad, that when my spouse showed me the email, my first thought was: "not again" and then " how sad" followed by "How can she defraud us", we will check but I think we are safe.
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Fri Aug 23, 2019 10:21 pm

Grt2bOutdoors wrote:
Fri Aug 23, 2019 9:34 pm
I doubt Dave Ramsey is going to be of help here. Sounds like this worker has a very full plate on their hands. Good workers are hard to come by, but if you loan the money you will have a receivable balance of $4,260. Until the next time...

How much are you willing to extend/lose (potentially)?
My number is $ 5000. I just think we will not really doing her any favors by loaning or gifting.
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Fri Aug 23, 2019 10:28 pm

togb wrote:
Fri Aug 23, 2019 9:37 pm
This is a tough situation, and tougher because your spouse has already crossed the line by making monetary gifts and loans. This blurs the line of employer, and perpetuates dependency beyond employer/employee. It's hard to unscramble eggs-- so you can't undo the fact that she's been allowed to share too much personal information and become comfortable asking for loans, that are not repaid.

You can change what you do going forward. No more loans, no financial gifts. And rethink the OT offer-- can you really project that you need 10 hours of OT each week? Or is this a gift in disguise?

If you feel compelled to help, then do a bit of research on appropriate services that are available in your community-- assistance programs through local government or area churches? As an employer there are risks in preferential treatment, and you're already at risk. If you wish to sponsor this person/family financially, suggest you sever the employment first. She certainly has problems-- but don't put your business at risk in the way you choose to help her.
You make excellent points. I agree however I would like us to be an united front as to no more loans or gifts. The OT offer was a partial gift in disguise; 5 hours may be more reasonable,
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Re: How to help an employee who is in debt and requesting a loan

Post by FGal » Fri Aug 23, 2019 10:29 pm

You've unfortunately already set a dangerous precedent for this employee giving them anything - loans/gifts - of money without clear contract/paperwork showing payment, interest, etc. She has according to your information already defaulted on your previous loan and now comes asking for even larger sums for similar emergencies. Two working spouses, two working teens, should be able to make it especially with the amount already lent. And you do realize you're not the only people this family is asking for money, right?

This is a trainwreck and more money is not going to fix it. They need to work more, they need to cut expenses to the bone (one of the kids "overspent" WTH?). Things need to actually hurt with real consequences for them to actually consider making real changes.

And the big thing - this is not yours (or your spouse's) job to fix or teach. Put the employer hat back on and keep it there. If they ask you/spouse for assistance in financial/debt stuff - then you can direct them to the Ramsey course (but I would NOT offer to pay it) because they are full grown adults and you need to stay out of their business. You already offered and gave more than you should and they're not any better off, and now expect to be able to pick your pockets every time something goes wrong.

You offer to get her more work hours, and you see what she can take out of her 401k. That's going the distance considering what other stuff you've already done. You gave her $1,250-ish as a gift. That's enough. Asking for $4k from your employer after all the other stuff is beyond ballsy. I don't believe it's rock bottom, but even if it is, offering to pay for a financial aid course isn't going to get them out of this as she's likely too far gone at this moment to see how it would help and likely would be super pissed if you offered.

Dear Jane (Doe),

I am so sorry your financial situation has not improved since our previous gift of $1,000 and the loan of $500 in the last 6 months. We will consider the remainder still owed on the loan an additional gift. But unfortunately, additional personal loans or gifts are no longer an option.

We would be happy to approve over time up to 10 hour per week if you wish to do so. We also confirmed that you are vested $2500 in the 401 K and we will check to see what you can withdraw (minus any penalties for early withdrawal) and let you know the amount within the week.


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Re: How to help an employee who is in debt and requesting a loan

Post by celia » Fri Aug 23, 2019 10:31 pm

Where we live, you can’t require the parents to pay for school supplies they can’t afford. There are often non-profits who would buy and donate that stuff to needy families.

How about calling a local school to see what the district policy is and point her to the local food bank.

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Re: How to help an employee who is in debt and requesting a loan

Post by Goal33 » Fri Aug 23, 2019 10:34 pm

How much does this employee make?
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Re: How to help an employee who is in debt and requesting a loan

Post by Sandtrap » Fri Aug 23, 2019 10:36 pm

I have very very rarely given an employee a monetary "gift", mostly in appreciation for something. Never a loan.
Once enabled, there's a dependent relationship that will not end. It get's easier to ask, eventually with expectations. And, it gets easy to give because to change course is too unpleasant. And, the deeper the hole, the harder to climb out, for both parties.

So. A decision has to be made.
Stop now. All monetary gifts, loans, and job favoritism. Or don't. (there's no halfway, no "nice or not nice".
Eventually, other employees will find out and then what when they come upon hard times?
But, one can be benevolent in other ways as you mentioned, offer of overtime, etc. But, that is a fair exchange of services for pay based on employee initiative.

Forgive all existing loans. Make it a clean break.

My grandparents were outstanding (self made) business people. So were many relatives. I often heard, "employees and tenants are not your friends".

j :D
Last edited by Sandtrap on Sat Aug 24, 2019 10:37 am, edited 3 times in total.
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Fri Aug 23, 2019 10:36 pm

OnTrack2020 wrote:
Fri Aug 23, 2019 9:39 pm
The car was repossessed, but is now looking for money for repairs to a car? Is it a different car?

I think putting in the comment about the Dave Ramsey course is absolutely not necessary. These types of situations just go from bad to worse. And, unfortunately, it doesn't take much to go from bad to worse. Cancer, four kids, car repair, and a child with autism. No amount of Dave Ramsey is going to fix this. :annoyed

What I would do is to offer to purchase some school supplies for the kids, or buy a gift certificate to Walmart for school supplies/clothing. Maybe the 401k loan to help fix the car?

Edited to add: I do like another poster who suggested community assistance such as churches, food banks, etc. They may be willing to guide her in the right direction. You might also be able to make some of those phone calls to see what is out there.
The car was repossessed and the $1000 gift got her the car back.

Why do you think that offering to pay for a Dave Ramsey course is wrong?
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Re: How to help an employee who is in debt and requesting a loan

Post by Grt2bOutdoors » Sat Aug 24, 2019 5:58 am

Dave Ramsey is for folks with behavioral issues in managing money. Cancer is a forced upon health issue, autism is another form of forced health issue. It’s not behavior that can be modified voluntarily or involuntarily. No amount of tough love from DR is going to relieve those difficulties. The husband? - DR FPU doesn’t work unless both parties are on-board.
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Re: How to help an employee who is in debt and requesting a loan

Post by OnTrack2020 » Sat Aug 24, 2019 6:24 am

Wildebeest wrote:
Fri Aug 23, 2019 10:36 pm
OnTrack2020 wrote:
Fri Aug 23, 2019 9:39 pm
The car was repossessed, but is now looking for money for repairs to a car? Is it a different car?

I think putting in the comment about the Dave Ramsey course is absolutely not necessary. These types of situations just go from bad to worse. And, unfortunately, it doesn't take much to go from bad to worse. Cancer, four kids, car repair, and a child with autism. No amount of Dave Ramsey is going to fix this. :annoyed

What I would do is to offer to purchase some school supplies for the kids, or buy a gift certificate to Walmart for school supplies/clothing. Maybe the 401k loan to help fix the car?

Edited to add: I do like another poster who suggested community assistance such as churches, food banks, etc. They may be willing to guide her in the right direction. You might also be able to make some of those phone calls to see what is out there.
The car was repossessed and the $1000 gift got her the car back.

Why do you think that offering to pay for a Dave Ramsey course is wrong?
Dave Ramsey is not going to "fix" cancer. Dave Ramsey is not going to "fix" having four children. Dave Ramsey is not going to "fix" having a child with autism. And all the associated financial costs that come with the above cannot be "snowballed" away. Offering to pay for a Dave Ramsey course, thinking that somehow that is going to alleviate these types of longer-term medical/behavioral health situations (and in the case of autism, a life-long behavioral disorder) is just not appropriate. However, it will make Dave Ramsey richer.

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Re: How to help an employee who is in debt and requesting a loan

Post by Olemiss540 » Sat Aug 24, 2019 7:59 am

$4000 is a deeper hole than getting a car on the road and getting kids ready for school.

I personally am of the belief that your original email response drafted is PERFECT. Dave Ramsey can't fix cancer or 4 kids as the above posters have figured out, but he does instill something missing in many of these circumstances, HOPE. The belief that this never ending circle CAN get better.

There are plenty of people in worse financial and physical shape that have been dug out of deeper holes than this with some motivation and support/counseling.
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Re: How to help an employee who is in debt and requesting a loan

Post by simas » Sat Aug 24, 2019 8:06 am

in my previous management experience and upon employee written request, I have arranged the upfont receipt of yet unearned salary with appropriate memo's by HR/payroll that these monies are subject to repay/withholding/clawback should employment be terminated for any reason.

however, the track record on these have been bad for me - in all cases employee was unable to continue to perform the duties required and we had to cut them.

yes, there are tools to do so. I am not sure they actually help..

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Re: How to help an employee who is in debt and requesting a loan

Post by RickBoglehead » Sat Aug 24, 2019 8:09 am

When I was an SVP at a company, many of the hourly staff constantly complained that they had no money and were not paid enough. Here's what I noticed:

- I brought coffee from home to drink on the way in, then drank the free office coffee. They stopped at Starbucks and bought an expensive coffee.

- I ate breakfast at home. They had breakfast delivered to work, eating on paid time, and spending roughly $7.50.

- I brown bagged it 95% of the time. My lunch drink was a soda, filling the 1 liter bottle from a 2 liter bottle at home, bought on sale. If my lunch totaled $3 a day, I'd be surprised. They usually went out or ordered lunch, spending $15.

I'd strongly urge the OP to not loan any further money to this employee.
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simas
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Re: How to help an employee who is in debt and requesting a loan

Post by simas » Sat Aug 24, 2019 8:10 am

Wildebeest wrote:
Fri Aug 23, 2019 10:36 pm

Why do you think that offering to pay for a Dave Ramsey course is wrong?
you are opening the door you may not want opened. why this and not another? why for this employee but not for some other employee?
with your personal money, do whatever you want (call it charity ,etc). with company money , how can one employee (regardless of stated or real reasons) be treated preferentially vs other employees? you will create appearance of unfairness (and discrimination) when starting to make up things which are not already in your employee handbook.

flyfishers83
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Re: How to help an employee who is in debt and requesting a loan

Post by flyfishers83 » Sat Aug 24, 2019 8:21 am

I’d really focus on the motivation to help out the employee. If it’s because she is a really strong contributor that would be difficult to replace, that’s different than we feel sorry for her. In the first instance, there might be a quantifiable business value to helping out. The second comes down to your thoughts on charity.

My wife was in a somewhat similar situation recently. She had a new employee that seemed very promising. However, every other day was a different story. They were a combination of sad and self inflicted. In the end, we did not provide any financial help. We needed to know whether the employee was going to be retainable at all. At some point you could do the business and other employees a real disservice by maintaining the employment relationship.

All that said, there are some employees that are critical, and we wouldn’t hesitate to assist within reason.

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galawdawg
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Re: How to help an employee who is in debt and requesting a loan

Post by galawdawg » Sat Aug 24, 2019 8:54 am

I have just a few observations:

1. Any communication to the employee about this request should be from the employer (your spouse), not from you.
2. While the employee may have a serious health issue and a child with a disability, it sounds like some/most/all of the financial issues are due to other factors (like the overspending on the credit/debit card by one of her family members).
3. A previous loan has not been repaid.
4. The amount sought is significantly more than reasonable (IMHO) for the stated needs.
5. Your spouse has provided loans and gifts to this employee who was only employed for one year before the first "need" arose. Other longer-term valued employees have not received these "bonuses".

Your spouse is on a slippery slope. i suspect that the employee will continue to come to your spouse for financial assistance until the well runs dry. Also there is a significant risk that providing these funds to this one employee will (or has already) create issues with the other employees, such as perceptions of favoritism or resentment that this newer employee is reaping monetary gifts based not upon work performance but on a personal relationship with your spouse.

If your spouse's company provides a good wage and good benefits, including health insurance to provide coverage for the employee's medical treatments, that is all that should be expected. With three other working/working age people in her household, it appears that this employee's issues extend well beyond a single unforeseeable medical emergency. Rather, it seems to be a very dysfunctional family situation that one would be wise to stay completely away from. This is an employee, not a friend or family member.

My humble recommendation is for your spouse to do no more for this employee than is done for any other employee. If overtime is generally available to all employees, your spouse can remind this needy employee of that option. If a 401k loan is an option for all employees, that option can be explained to the needy employee.

While I admire the desire to be kind and helpful to this employee, I respectfully suggest that some appropriate employer/employee boundaries be established. Your spouse should explain that no additional loans or gifts are possible, remind the employee of options that are available to all employees (overtime, 401k loan) and suggest she seek out help from family, friends or her community if those resources are insufficient.

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jabberwockOG
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Re: How to help an employee who is in debt and requesting a loan

Post by jabberwockOG » Sat Aug 24, 2019 8:56 am

No more loans, no more gifts. Sad to say you are will likely do more harm than good over the long run by providing more "magic" money from the sky that this person and family does not have to earn or be accountable for. If you keep "lending" money the requests from this person will likely never stop, and if you ever say no their anger and resentfulness towards you will almost certainly surprise you.

Clearly some amount of this person's issues are 100% self inflicted mostly due to long standing ongoing lack of forethought, and ongoing bad decisions/choices. Also some amount of their problems are clearly not their fault (especially the health issues, and handicapped child) but frankly that is how life works. Bad stuff happens in one form or another to almost everyone in their lifetimes, and when it happens the ongoing damage and economic frailty caused by the lifetime of poor planning and bad decisions/choices come home to roost.

Sounds harsh I know, but you are running a business and the business should treat all your employees fairly and equitably, and not get caught up and deeply involved in one employee's ongoing life issues. In terms of friendship or personal relationship with this person you could certainly work with a local charity, family services, or church to help coordinate assisting this family but it should an activity separate and distinct from the business.

sandburg
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Re: How to help an employee who is in debt and requesting a loan

Post by sandburg » Sat Aug 24, 2019 9:12 am

If the husband has a "good trade" why isn't he working and trying to support his family? The jobs situation for tradesmen has been pretty good for the past 8 years.

WillRetire
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Re: How to help an employee who is in debt and requesting a loan

Post by WillRetire » Sat Aug 24, 2019 9:20 am

Wildebeest wrote:
Fri Aug 23, 2019 10:05 pm
Vanguard Fan 1367 wrote:
Fri Aug 23, 2019 9:14 pm
That is a tough one. In one case an employee asked for a loan and I said that if that employee would resign I would give them the money. And I gave them more than the loan requested. We found a better employee without the financial and other drama.
Great advise, you set up good boundaries helping the individual and your business, unfortunately she will not be easy to replace and we already breached boundaries
You will have to replace her eventually. Don't throw good money after bad, else it turns into enablement, i.e. you & your spouse are enabling someone who cannot live within her means for a variety of reasons. Don't forget that her husband does not work much (your statement). He needs to step up. Not you.

You have a responsibility to your other employees. Despite what they might say to you, there is bound to be resentment. And that will cost you and your business.

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Wildebeest
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Sat Aug 24, 2019 9:27 am

BillWalters wrote:
Fri Aug 23, 2019 9:43 pm
I would gift the money and make it clear no additional help is available.
That is what I am leaning to. This will come out of my wife's personal account, not the business account ( our personal accounts are shared). I am concerned that other than making my wife feel better for the short term it will only create more issues down the road.
The Golden Rule: One should treat others as one would like others to treat oneself.

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Re: How to help an employee who is in debt and requesting a loan

Post by jminv » Sat Aug 24, 2019 9:35 am

Wildebeest wrote:
Fri Aug 23, 2019 9:00 pm
Question: What would you do?

My spouse had got an email request to lend an employee $4000. She states she is desperate and has no way to pay for needed car repairs or get her young children ready for school. She promises to pay back $ 200 a month (no mention of interest, or collateral). The husband, with a good trade, does not appear to work much and their home situation sounds complicated although we do not know the details and do not want to pry.

My spouse had given the employee a $1000 as a gift when her car was repossessed 6 months ago. Since then the employee had had a recurrent bout with cancer. (She missed almost no time for the chemo).She reports her eldest daughter was on her bank card and had overspent and my spouse had lent her $ 500 over the weekend a couple of weeks back and we were paid $ 240 back.

She has 4 children one of which is autistic and the two eldest children are working. We pay a living wage and good benefits. She works hard, is a good employee for the 1 1/2 years she has been with us. We would like to help and do right, but we do not offer personal loans to other excellent employees who have been with for many years and have not had any requests either.

My first try at a response is:

Dear Jane (Doe),

I feel really bad the kids are starting school and you have no money to buy them anything. I want to help, but work/personal loans are not an option. The company will pay for you and your husband for Dave Ramsey course. You can work over time up to 10 hour per week if you would elect to do so. You are vested $2500 in the 401 K and we will check to see what you can withdraw.

Spouse of Wildebeest.


My spouse would like to know what credit counselling services the Bogleheads would suggest,
is a Dave Ramsey course helpful.
If we would offer overtime to Jane Doe we are obliged to offer over time to other employees, which is not feasible.

Any suggestions?
Problems seem to be cancer, child with autism, a husband who is not pulling his weight, and an unreliable car. From a financial point of view, the biggest thing that would help your employee is if the husband worked and brought in income. I don't see how a Dave Ramsey course is going to help with that - at worse this is going to seem like the spouse of the boss doesn't understand my problems. I wouldn't do any of that over email, if that's what you want to do, either. They're in pretty dire financial straits (apparently) but he won't make the effort? It can't be easy to being treated for cancer, facing up to your mortality and the impact that will have on the autistic child, having to work with cancer while the husband doesn't work much, and having unreliable transport. I think this is beyond your ability to help, especially since a lot of it has to do with her husband.

Does this woman have any authority over the company's accounts, payments, vendors, cash? I hope not and if she does, you need to re-evaluate that.

I've seen many these type of sad stories myself and at the very beginning, I was a bit of a sucker and would try to help, make exceptions, etc. People will take advantage, test your boundaries, and their problems are often self-inflicted, beyond your ability to do anything about, or embellished/lies and designed to extract money/favors/exceptions from you. The sad reality is that, once you look at it objectively, they often need to be replaced. Even if she is a good worker, so are your other employees who give you no drama. In fact, they're better employees because of it, they're reliable and understand the employer - employee relationship. You'd probably be better off at this point finding her replacement and I'm sure at some point you're going to have to replace her. Not helping or letting go of the person can be in conflict with how you want to view yourself as a person (kind, caring, helpful, reasonable) so it's natural to try to come up with a solution to avoid something that is in conflict with how you view yourself, else this conflict can cause inner turmoil and change in view to one we don't like.

If you still want to help her, you need to make it a personal gift/charity. If it's fixing the car, ask to see the repair bill. You could couple it with her paying out of her 401k, I guess. Expect this to continue. Business is not a charity and what this woman is basically doing is forcing you to pay her more over time. It won't stop.

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Wildebeest
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Sat Aug 24, 2019 10:01 am

Archimedes wrote:
Fri Aug 23, 2019 9:45 pm
If this is a highly valued employee who is not easily replaced, then you might consider a loan. If you have the means to lose the loan money, then given the circumstances, loaning the money might be reasonable under the difficult circumstances being faced.

I would first ask myself some additional questions. How will the other employees feel? Will this create tension among the workers and interfere with the culture or success of your business?

Our company has extended a loan to a struggling employee with a signed loan document and a payroll deduction for payback over a period of 9 months. But realize that when the home situation becomes more desperate, you could get stiffed.

Being kind and generous within your ability to do so is a virtue. At the same time, you may be crossing some boundaries of taking on too much responsibility for your employee.

I always frame a personal loan as a gift in my mind. If I get paid back, that’s great. If I don’t get paid back, that is ok because after all it was a gift.

Sending the employee to personal finance education could be helpful but also could be taken as an unwelcome, major insult. “You don’t understand the current extenuating circumstances that led to this struggle.”
Thanks for your thoughtful feed back.
You bring up excellent points especially how it would affect other employees,
My preference is not want to extend loans. Our plan was to offer the Dave Ramsey course as a benefit to all employees as part of educational benefits.
The Golden Rule: One should treat others as one would like others to treat oneself.

cashboy
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Re: How to help an employee who is in debt and requesting a loan

Post by cashboy » Sat Aug 24, 2019 10:28 am

Wildebeest wrote:
Fri Aug 23, 2019 9:00 pm


My first try at a response is:

Dear Jane (Doe),

I feel really bad the kids are starting school and you have no money to buy them anything. I want to help, but work/personal loans are not an option. The company will pay for you and your husband for Dave Ramsey course. You can work over time up to 10 hour per week if you would elect to do so. You are vested $2500 in the 401 K and we will check to see what you can withdraw.


your approach above is a good one.

certainly the employee's situation is a bad one, but doing more than what has already been done (in the way of loans) will likely do more harm than good. the same goes for gifts of money. this comes from first hand experience.

in general, it is best to distance oneself from such situations rather then get embedded in them; as an employer even more so.
Last edited by cashboy on Sat Aug 24, 2019 11:01 am, edited 1 time in total.
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Re: How to help an employee who is in debt and requesting a loan

Post by Ivygirl » Sat Aug 24, 2019 10:35 am

Where I have worked, it's common to take up collections among coworkers when someone has an urgent need like cancer treatment or needing school supplies. Take up an anonymous collection (if it's OK with the person you are collecting for), and then supplement it to whatever amount you feel is right. Forgive the debt she already owes, kindly decline to lend more, and offer instead to do this collection so her coworkers can help her.

She is feeling very alone with her problems.

If you are inclined to do it, an option could be to become more generous with all of the employees. You pay a good wage and benefits already, it's not a matter of owing them anything, but some employers do include in their business plans acts of generosity toward their workers. Turkeys at Christmas, a drawing for a free oil change, gift cards, zoo/museum passes that can be checked out, pizza on Fridays, and so on. They say that giving money away is the most fun you ever have with it, though as an employer there should not be favoritism to just one, it should be spread around. Again this is not something owed to anybody. If you are good to all, it does away with feelings of guilt at refusing a particular request which, indeed, I think you should refuse.

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Wildebeest
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Sat Aug 24, 2019 10:47 am

Stinky wrote:
Fri Aug 23, 2019 9:47 pm
Vanguard Fan 1367 wrote:
Fri Aug 23, 2019 9:14 pm

I think Dave Ramsey courses can be helpful. Of course the employee needs to have a teachable spirit.
+1

Dave Ramsey often talks about people “being sick and tired of being sick and tired”. Until people reach the point of being sick and tired, they will not change.

I think that Dave Ramsey’s budgeting and money management advice is excellent. His investing advice, not so much.
I have read articles about Dave Ramsey and postings on the Bogleheads where he was mentioned. I have never listened to his radio program or read anything he has written.

Your point (very gently put) that our helping out will keep her from changing, is well taken.
The Golden Rule: One should treat others as one would like others to treat oneself.

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Wildebeest
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Sat Aug 24, 2019 10:50 am

Starfish wrote:
Fri Aug 23, 2019 9:49 pm
We went through a similar situation. I cannot give advice but prepare yourself for a continuous loan if you go this path.
I appreciate the empathy. Actually I think you are in a better position than us to give advice.
The Golden Rule: One should treat others as one would like others to treat oneself.

investordoc
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Re: How to help an employee who is in debt and requesting a loan

Post by investordoc » Sat Aug 24, 2019 11:04 am

The above post concerning the employees position in the company is valid. My father's practice manager and book keeper who was a family friend started writing checks to save their failing farm. She also wrote herself bonuses. She was a trusted friend and employee. When my father finally caught on she had embezled close to $80,000. This was early 1980 money so a much larger number if put into today's numbers. When presented with the evidence she admitted everything but in her mind she had no other choice. They needed the money to save the family farm.

If this person has any ability to access the finances of the company please monitor closely. Good people can do bad things when they don't think there is a way out.
It is what it is until it isn't anymore

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Wildebeest
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Sat Aug 24, 2019 11:16 am

9-5 Suited wrote:
Fri Aug 23, 2019 10:06 pm
You guys are very kind. I would never give a loan to any friend, employee, or family member. It so rarely seems to be a one time event, as you are experiencing.

They need to figure this out on their own for the long-term. Getting bail outs from a dependent relationship helps put out the fire of the moment, but they need a decades long plan for change not a minutes long one.
My wife is very kind. I was not asked for my opinion till we received the email requesting a $ 4000 loan.

I agree with your assessment.
The Golden Rule: One should treat others as one would like others to treat oneself.

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TxAg
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Re: How to help an employee who is in debt and requesting a loan

Post by TxAg » Sat Aug 24, 2019 11:31 am

Somebody needs to have a "talk" with the husband...

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