WHAT SHOULD EMPLOYERS DO WHEN EMPLOYEES BORROW MONEY FROM CLIENTS?

The hairdressing and beauty industry thrives on trust, professionalism, and the relationship between client and stylist. These relationships are often personal, built over time, and can be a strong foundation for client retention. However, the line between personal and professional can sometimes become blurred. One serious issue that some salon owners face is discovering that an employee has borrowed money from a client.

This practice not only undermines the professionalism of your business but also exposes your salon to reputational and financial risk. It is therefore important to handle the matter carefully, legally, and fairly, both to protect your business and ensure justice for the client involved.

Understanding the Impact

When an employee borrows money from a client, the situation is more than just a private financial arrangement. In the context of a salon, it becomes a professional issue. Such behaviour can erode client trust, damage the reputation of your business, and possibly constitute a form of misconduct or dishonesty depending on how the transaction occurred.

Whether the employee intended to repay the client or not, the act itself reflects poor judgment and may create discomfort or awkwardness for the client, potentially causing them to stop visiting your salon altogether.

Step 1: Investigate the Complaint

When a client reports that they have loaned money to one of your employees, it is important to take the complaint seriously and act promptly. Begin by documenting the complaint thoroughly and professionally. Acknowledge the client’s concern and reassure them that you will investigate the matter.

The next step is to conduct an internal investigation. This should involve meeting with the employee in question to give them an opportunity to respond to the allegation. Approach this meeting without making assumptions but do ask direct questions. Determine whether the employee admits to borrowing the money, under what circumstances it happened, and whether any repayment has occurred.

If the client is willing, you should also speak with them to get a clear version of events. Try to gather supporting evidence such as proof of payment, WhatsApp messages, or other communications that may have taken place.

Throughout the investigation, keep detailed records. The goal is to establish the facts clearly so you can decide on the appropriate course of action.

Step 2: Determine the Severity of the Misconduct

Once you've gathered the facts, assess how serious the misconduct is. Was this a once-off mistake made in desperation, or part of a pattern of boundary-crossing or poor decision-making? Did the employee use their position to pressure or manipulate the client? Did they make any promises to repay the money and then fail to follow through?

In cases where there is clear evidence of dishonesty or manipulation, the situation may qualify as gross misconduct. This could justify serious disciplinary action, including possible dismissal.

Step 3: Disciplinary Action – Follow Labour Law

Any disciplinary action taken must follow fair procedure, as outlined in South Africa’s Labour Relations Act and the Code of Good Practice on Dismissals. A formal disciplinary process should begin with a written notice to the employee, informing them of the nature of the misconduct and the date of the disciplinary hearing.

At the hearing, the employee must be given a fair opportunity to respond to the allegations. They may also be represented by a fellow employee or shop steward. After all evidence has been presented, the chairperson of the hearing must determine whether the employee is guilty of misconduct and, if so, what the appropriate sanction is.

Depending on the severity of the conduct and the employee’s disciplinary history, the outcome could range from a written warning to dismissal. In cases involving dishonesty or a breach of trust, dismissal is often considered fair and justified especially if the employer-client relationship has been negatively affected.

Step 4: Recovering the Client’s Money

While the disciplinary process addresses the employee's behaviour, the matter of repaying the client must be handled separately. Ideally, the employee should acknowledge the debt and agree to repay it. This can be formalised through a written Acknowledgement of Debt (AOD), which sets out the amount owed, the repayment schedule, and any consequences for non-payment.

If the employee is still employed by you, and consents in writing, you may deduct the agreed repayment amount from their salary. However, it’s important to comply with Section 34 of the Basic Conditions of Employment Act, which prohibits wage deductions without written consent. You cannot withhold an entire salary or impose a deduction without agreement.

If the employee refuses to repay the money or no longer works for you, your options become more limited. You can issue a letter of demand and, if necessary, refer the matter to the Small Claims Court (if the amount is R20,000 or less). For larger debts, or where the matter is more complex, legal advice may be required.

Preventing Future Incidents

Prevention is always better than cure. One of the most effective ways to avoid situations like this is to implement clear workplace policies. Your employment contracts and internal code of conduct should explicitly state that borrowing money from clients is strictly prohibited, regardless of intent.

It may also be helpful to provide training to employees on maintaining professional boundaries with clients. Many employees may not understand how their actions, even if well-meaning, can impact the business or their own job security. Creating an open environment where employees can discuss financial hardship or request internal support (rather than turning to clients) may also reduce the temptation to seek loans inappropriately.

Discovering that one of your employees has borrowed money from a client can be stressful and disappointing. However, it is also an opportunity to reinforce professional standards within your business and take steps to protect both your clients and your brand.

Handle the situation promptly, fairly, and in accordance with labour law. Aim to resolve the matter in a way that maintains your reputation, protects your clients, and sets a clear precedent for the future.