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Dear Cindy – Loan Money to Staff Member/Friend?

By Cynthia M. Piccolo (Career Questions)
dearCPLoanMoneyToStaff image

Dear Cindy: 

My long-time employee and friend is going through a rough patch financially, and asked to borrow a few hundred dollars. I'd be happy to help out, but the fact that I'm her boss makes the situation more complicated. Can I avoid allegations of favoritism if I give her the money outside of work and make her promise not to tell anyone on staff?

Sincerely,

Good Idea?

Dear GI: 
As mentioned in a query from someone who was considering making a loan to a coworker, what you're doing can be very tricky. It's precedent-setting, filled with opportunities for hassles and stress and, as the old saying goes, the fastest way to destroy a long-time friendship.

Nonetheless, if you feel that you should loan her the money, do the following:

  • Loan the money from your personal funds, not from workplace funds.
  • Make the money transfer outside of work.
  • While you may want to say "this is just between us," you don't really have to ask her to be silent, because most people don't like to announce to the world the fact that they're having financial problems.
  • Have a written agreement that includes repayment terms, and both of you sign it. This not only covers you in the event of lack of payment, but against charges of favoritism: It's a loan – a "business" arrangement – nothing more.

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