Posted on July 16th, 2019
What’s going on, fellow entrepreneurs? It’s John Fagerholm again.
Today, I want to talk about charity. As entrepreneurs, especially successful ones, we should all care about giving back to the community.
However, the mistake entrepreneurs make is they give charity within their own business. That’s a huge mistake.
One of the big ones is lending money to your employees. Never, ever, ever lend money to your employees!
Never give advances on checks. It just comes back to haunt you.
California law is very strict about what you can deduct from paychecks and what happens a lot of the times is an employee borrows money or takes an advance on pay and then the employer deducts it from the next paycheck, and what ends up happening is if the employee gets mad, then now they have a cause of action against the employer.
All simply just because you gave charity.
So the better way, or the only way you can do it through the law is if you have a written agreement with the employee to deduct a certain amount per month, and then on top of that, the employee can renege on that at any time or void that contract any time.
That’s a better way to say it. So it just isn’t worth it. If an employee asks to borrow money or wants an advance on the check, the better thing is just to have a policy that you don’t allow that at all.
That way, you don’t run into problems, because you doing a favor for an employee can end up costing you a bunch of money.
The other big one that I see all the time is employers that pay the overtime in cash.
So an employee will come to an employer in California and say, “I have Medi-Cal or Medicare and I don’t want to report my overtime because it will hurt my Medi-Cal.” So besides them contributing to and breaking the law anyway, now you’ve given your employee a cause of action.
So what I see happening is they pay the overtime in cash and then the employee comes back later, after they’re terminated or for whatever reason, and says, “I worked all these hours overtime and I didn’t get paid the overtime.” Even though they received cash for it.
Now the employer has to, number one, prove that they actually did pay them the overtime and paid them in cash, and then they’re likely going to have to defend themselves for not paying the taxes related to that overtime.
So in my opinion, the charity’s awesome, but charity within your business is terrible. Never do it.
Until next time.
