rent deducted from paycheck

I was just informed that our payroll department has been deducting an employee's rent from their paycheck and forwarding it to the employee's landlord. This apparently has been going on for a couple of years. Payroll has a signed authorization from the employee to do this since the employee was behind in their rent and this would get them back on track with their payments. Is this legal or are we asking for trouble somewhere along the line? Thanks.


  • 7 Comments sorted by Votes Date Added
  • I doubt it's illegal, but highly improper for the company's employee to be handling the business transactions of another employee while on your clock. Does the accounting manager and business owner or executive know about this? There's your answer.

    Oh, and I forgot to mention using the company's postage machine to mail his rent and the company's equipment to process his check and the shennanigan's of journal entries to reflect that money moving through the company and out as some sort of payable. Boy! She's probably also giving him backrubs.

    Disclaimer: This message is not intended to offend or attack. It is posted as personal opinion. If you find yourself offended or uncomfortable, email me and let me know why.
  • And what happens when the check inevitabley gets lost in the mail. Late fees, possible eviction, etc. The EE looks at the company for hosing up his life and all you were trying to do was accomodate a situation of poor money management.

    I refuse to accomodate these types of requests, and we have had plenty of them. The farthest we go in this area is an occasional advance on payroll.

  • We’ve been doing similar things for years. At their request,we make scheduled mortgage and auto loan payments for employees. With the proper documentation we also put money into employees’ Christmas-club and savings accounts. We call it direct deposit.

    Geno, SPHR
  • That sort of thing can be done, although Don is right about the extra accounting it creates - especially around year end auditing and reconciliation. I don't do it here because the EE can just as easily direct all that to happen from his/her checking account and keep the responsbility with the bank and their own organization.

    On very rare occasions, the wire systems will go down and payroll will be delayed by a few hours. This can cause late payment charges, etc. and leave the company holding the bag for the associated fees and charges.
  • It's not technically direct deposit at all unless the deposit is made to a banking institution. I've also known of auto loans, Christmas Club, savings accounts and even auto insurance deductions to be transacted through payroll, but only when there is a credit union connection with the company or either the credit union set up the auto insurance program and sponsored the agent visits to the locations each year.

    This is far from taking on the responsibility of paying somebody's bills. I'd like to know what the auditor says when he/she stumbles across the payments. Surely this is thought to be an irregularity or exception. But, hey I'm no accountant.

    Disclaimer: This message is not intended to offend or attack. It is posted as personal opinion. If you find yourself offended or uncomfortable, email me and let me know why.
  • I'm not aware of anything that makes it illegal, but yes, I believe you are asking for trouble.

    As others have pointed out, this could look like the company is accepting responsibility for making sure his payments are on time, etc. I would tell the employee to find a bank that is willing to make automatic payments for him, and leave the company out of it. Many banks offer these type of services. (Of course the employee must put his check IN the bank in order for this to work...)

    If the payroll deduction is not required by law (child support, garnishment, etc.) then we won't do it.
  • Boy I wish I worked for you and I would just let your payroll dept. be my private banker!!! You have really spoiled your employees.
    I would say have your employee set up an automatic deposit into his Landlords account (if the landlord will give it to him)... yes I have had this done (if you offer automatic deposit, it isn't up to you as to where the money is deposited.. this is employee's decision/problem). Or have them have their money deposited and their financial institution draft their account each month for their Christmas club amount (or whatever.)
    Stop the practice of cutting checks. You only have to do this for garnishment/childsupport and IRS orders.

    E Wart
Sign In or Register to comment.