Hypothetical scenario:
- A web firm gets hired by a customer to build a web app
- The employee of the web firm gets paid x-number of dollars to do the project
- The project takes too long and the customer demands their money back
- The web firm repays the customer
- The contract doesn't indicate that the employee must repay the firm, only that the firm must repay the customer
Should the employee of the web firm repay their firm for the loss?

What does the contract say?

The company must repay, but there is nothing that says the employee must repay the company.

Employee did what he was asked for, and get paid for it. He shouldn't repay. It's the company's responsibility to keep the customer happy and deliver the product on time.

IANAL
There are two seperate contracts in play here
Employee -> Business
Business -> Customer
The employee is under contract to the business to deliver "x" and as long as that has been done within the lines of the contract then that contract has been satisified
The business -> customer contract is legally separate and has no bearing on the first contract. A court might see some link as a 3rd party.
Question: How much we talking about and in what country?

I personally think that the employee should pay back the firm because it is his fault that it was not completed in time. However, if the employee told the company a few days before that it wouldn't be done in time, he shouldn't have to pay back the firm.

I personally think that the employee should pay back the firm because it is his fault that it was not completed in time.
I didn't see where it stated the employee was at fault. He was given a project, and the entire web app wasn't completed on time.
Was it the entire project that was given to the developer? Was the developer informed he needed to complete it in a set amount of time? Was the amount of time sufficient to create the app? Was it discussed with the dev before promising it to the client?
Missing some info needed to judge this.
If he was hired/subcontracted to do the whole project, and failed, he should be made to refund, but he keeps the completed code.
If he's a regular employee, and he didn't complete it on time, the reason needs to be known.

Was it the entire project that was given to the developer? Was the developer informed he needed to complete it in a set amount of time? Was the amount of time sufficient to create the app? Was it discussed with the dev before promising it to the client?
Hmmm... Maybe I didn't think all of the possibilities through.

There is way too much at play..
WHO caused it to take too long? Was there communication errors between the client and company? Did the company quote the client an incorrect time without consulting the developer? Did the client make changes and expected it to not take any extra time?
If the client was dropped even because the developer took too long - you are paid for time spent on a project. If you signed a contract that said you would pay back funds on an uncompleted project, then that's your fault and you should really learn to not sign 1 sided contracts. Not to mention to put in clauses that refrain from either party cancelling the contract due to extenuating circumstances unless it is well documented. All changes expected beyond the nitial contract should also be well documented, also include a due-dilligence, that as long as there is proper warning and it is laid out as to why it will take longer-there will be no cancellation and it is agreed upon.

I have a 20 page contract for my current project that will penalize me double my rate per every day late, however if I am delayed for any reason to do with the client being delayed, changing their mind, etc. I am given that time on the back end. If I know I will be late due to a unknown issue aslong as there is proper warning and it is within reason and agreed upon, it is acceptable. It cuts out excessive push backs, but also the leniancy to allow pushbacks if properly justified.
**** happens, they can either cut bait and invest in another company, or see the product slowly come to be. You should do the responsible thing and shift developers, you're the project head, you signed the contract - it's your responsibility to make that product meet it's deadline, not your developer. It's his responsibility to make it work. If he is the project manager, did the quote, and everything else - then he should be bound to the contract and that's your fault. Otherwise if he's just a developer - it's not on his shoulders, once 50% was nearing and you had 25% time left, you should've made the decision to double up on manpower and eat a small fee instead of losing the client and staining the name.

I personally think that the employee should pay back the firm because it is his fault that it was not completed in time. However, if the employee told the company a few days before that it wouldn't be done in time, he shouldn't have to pay back the firm.
The thing with this is that a company could get a job for two weeks of work and tell an employee the deadline is a week. If they only assigned one employee to it, they knew it would not be done in time. One point of management is to judge timescales appropriately - including asking the employees about it, and assigning teams, and whatnot. It is management's failure if they accepted a job they could not complete.
There is also the issue of the two separate contracts, mentioned above. The employee is not directly connected to the customer. If it was the employees fault because of neglect, the company could fire the employee, but the employee would not have to repay any wages.

Unfortunately the option i had in mind was "Employee should be paid for the completed work"
The project completeness depends on how effective the communication is between the employee and the employer.

As a programmer, there are generally certain things that are taken for granted. One of them is time.
There really isn't enough information presented about the project, it's guidelines, and resources available to complete the project, in order to form a fair opinion.
I will say this though. Employees work for you. Ultimately YOU are responsible for their actions in the workplace. Employees don't hire themselves.
Learn from mistakes, and replace your programmer if really needed. Don't expect your programmers to be Superman if you're not going to back them when they fail as well.
They'll never want to take chances for you again.

Sales reps are routinely charged back for closed sales that don't pay or cancel within a given time frame, but those terms and policies are normally built into their contracts with their employer. What happens with developers depends entirely on their terms of employment. In general, I would not expect them to pay back for jobs not completed on time.

there should be a non-refundable deposit or set sum within the contract. If there is no contract then ethically, there should be a minimum...you know..thanks for trying, it didn't work out, but here is some money and go our separate way, but legally, no contract or nothing in the contract stipulating this, then NO, there is no obligation to return the funds.

Employee did what he was asked for, and get paid for it. He shouldn't repay. It's the company's responsibility to keep the customer happy and deliver the product on time.
Agreed. Unless the employer->employee contract stipulates otherwise, the employer must bear the financial loss there.
The cost of doing business...
-mike

There is way too much at play..
WHO caused it to take too long? Was there communication errors between the client and company? Did the company quote the client an incorrect time without consulting the developer? Did the client make changes and expected it to not take any extra time?
If the client was dropped even because the developer took too long - you are paid for time spent on a project. If you signed a contract that said you would pay back funds on an uncompleted project, then that's your fault and you should really learn to not sign 1 sided contracts. Not to mention to put in clauses that refrain from either party cancelling the contract due to extenuating circumstances unless it is well documented. All changes expected beyond the nitial contract should also be well documented, also include a due-dilligence, that as long as there is proper warning and it is laid out as to why it will take longer-there will be no cancellation and it is agreed upon.
This is not about myself. A friend of mine is the one under fire; he told me about it. I am trying to defend him because he can't afford such a large bill, and he wanted to remain anonymous.

If the work was not covered by a contract , he can make his choice either to pay back or not to pay.

To answer the title: No, they are paying for the developer's time. It's not the dev's fault that some sales/management person overpromised on the timeframe.
To the people here who think the dev should pay back the company: I find it funny that only the bottom tier companies would ask for such a thing. They're also why I won't take on any project without 50% upfront. Weeds out most of the scum and bottom dwellers :D

Hypothetical scenario:
- A web firm gets hired by a customer to build a web app
- The employee of the web firm gets paid x-number of dollars to do the project
- The project takes too long and the customer demands their money back
- The web firm repays the customer
- The contract doesn't indicate that the employee must repay the firm, only that the firm must repay the customer
Should the employee of the web firm repay their firm for the loss?
No.
By the way, if the employee *does* pay the firm, the employee may still have to pay tax on the money they received.

Given absolutely no context, I think it's only fair as a default that the company eats the loss. If it's a sore enough point that this is even a question, the employee should probably brush up their resumé. The blame game never ends well. ;)

It's the company's responsibility to give the customer the right scheduling, which should be logical. So if a problem happens it will be the company's or the customer's mistake not the employee's one unless the employee isn't working well which means this employee shouldn't be in the company
so no absolutely not is my vote

This is the reason why in software projects you never , but never !!! , commit youreself on deadline. if the customer want that someone will commit on deadline then in such case the customer need to take in house programmers. outsource services never commit on deadline , and in case they are then the outsrource service provider must take quad safety factor for the time delivery.

Hypothetical scenario:
- A web firm gets hired by a customer to build a web app
- The employee of the web firm gets paid x-number of dollars to do the project
- The project takes too long and the customer demands their money back
- The web firm repays the customer
- The contract doesn't indicate that the employee must repay the firm, only that the firm must repay the customer
Should the employee of the web firm repay their firm for the loss?
I would say that it is the responsibility of the company to ensure that project gets delivered on time. But definitely the employee should be accounted for the delay in delivering the project, but thats not by having him/her pay back to the company for the loss occurred. Instead build a Performance based culture in the organization and link Salary of the employee based on their performance. You will see that the employees productivity increases and all projects are meeting deadlines. Trust me, PE and Salary is an effective tool to increase productivity of your organization. This will ensure that the employees puts their 110% in their work. End result, your organizations service will delight the customer.