Is it halal to charge a fine for late payment?

[Intahnet]

Asalamualikum,

I am an IT contractor working through my own limited company here in the UK.

I worked for a full month for a client in September, and legally the client has 30 days from the invoice date to pay me.
According to UK law, if they do not pay me within 30 days, I am allowed to charge them interest, or charge them a penalty late fee.

Obviously interest/riba is haram, and I won't do this, but is a penalty fine haram?

I have read IslamQA answer number 5248 (I can't post links yet) but I am a bit confused by it.

I have done the work for a month, and I'm certain the agency is not going through any financial difficulty or anything like that, in fact they have already received the payment from the end client. I have notified them quite a few times, and will be giving them a few more days before seeking legal advice, but from the Islamic perspective they have delayed my payment, which naturally adds difficulty on me, so can I not fine them as a deterrent from doing this again? I still have another 5 months remaining on my contract, and if they do this for every payment, it will be very frustrating for me.

Would it still be considered riba and so be haram in this case?

I'm not really fussed about the actual penalty fine money, it just seems a good way to serve as a small deterrent to show that they need to honour our contract terms and not delay my payments.

[Scimitar]

Very good question, I would also like to know the answer to this.

Scimi

[brotherabdullah]

As Salaam Alaikum Brother,
I currently work in office where my bosses are Muslim and they do charge late payments.
However, I did some research on this and ran across this example that may explain whether or not it is haram to charge a late fee:
"For example, a trader said to the client: If you pay me after one month, the price is five pounds, and if you pay after two months, it will be ten pounds. Now, if he chose one of the two options and the agreement took place on it, e.g. he said: I take the option of paying you ten pounds after two months, this will not be classed as Riba.If, however, the contract was not finalized by deciding on one of the two options, e.g. the client said: I will see whether I can pay you in one or two months, (and as a consequence, five or ten pounds) then this will fall into the definition of Riba, thus Haram."
So in the case where there is an agreement it is halal, however if it is a consequence for not being a time it is considered haram.

[Khalid Saifullah]

Wasal

In my most humble opinion, charge the fine or penalty, but don't use the money for your personal use as it would be regarded as riba.

Use the money to pay your government taxes or any government levies. U could also give it to animal agencies or very poor Muslims with no intention of reward.

And Allâh Ta’ala knows best

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[ardianto]

Assalamualaikum.

When I had travel agent, a company director bought airline ticket from me, and he promised he would pay after he back from his journey. I agreed.

After he back from his journey I phoned him, and he said "Okay, I will come to your office to pay". I waited for two days which he didn't come. I phoned him again. He promised me like that but still didn't come. Finally I went to his office. I met him, but he tried to offer me a 'solution'. He said "I haven't had money for this time, but I have no objection if you charge me a fine. So, how much the fine I must pay now?". But I told him "No!, I will not charge a fine. I just want you know that I must pay the airline!". It gave good result. Few days later he paid.

Alhamdulillah, I was not trapped when he offered me to charge him a fine. Because if that's happened, then he would pay in longer time. Maybe a month later, maybe few months later, which he pay the fine, because that's what he want. I knew what's in the mind of businessman like him. He wanted to use that money and gave me compensation. And if that's happened, what's difference than I gave him loan and take the riba as compensation?.

Frankly, I do not suggest to charge a fine for late payment because it can turn into riba. It's better if you seek other solution. If the client able to pay but he is 'naughty', push him to pay. If the client has intention to pay, but something happen in his financial situation, allow him to pay some at the moment, and the rest later.