Q: My business is low on cash. Can I offer my workers a “bonus” or “compensation” if they agree to delay payment of wages for a month?
A: Once wages are due, it is prohibited to offer the workers an additional amount for delay of payment. This is because awaiting payment of the owed wages is considered a “loan” to the employer and the “bonus” is considered ribbis on this loan. (Y.D. 173:12)
Therefore, the contract cannot stipulate additional, increasing charges for delayed payment. [A one-time, fixed penalty for not paying promptly is permitted, though. (Y.D. 177:18)] Even if the employer withheld the wages without consent, the worker is not entitled to receive interest on the delayed wages according to most authorities. (Shach 176:8; see also Bris Yehuda 2:17)
However, after the salary is paid, some authorities permit distributing a small bonus if it is not linked to the delay in salary. For example, the employer may distribute a holiday bonus or issue a subsequent paycheck ahead of schedule. (See Shach Y.D. 160:10; The Laws of Ribbis 10:13)
If the wages are not due yet, it is permissible to extend the job and pay a higher amount at the end. For example, if a person hired a painter and wants to delay payment, he can suggest – before the work is finished – to also paint the pantry later and add for the delay till then. This is permitted because the homeowner has no obligation to pay until the job is finished, so that awaiting payment until then is not considered a “loan” to him. (Y.D. 173:12)
Authored by Rabbi Meir Orlian
These articles are for learning purposes only and cannot be used for final halachic decision. The Business Halacha email is a project of Business Halacha Institute (www.businesshalacha.com) and is under the auspices of Rav Chaim Kohn.