What is Loan to Employee Policy?

[Company Name] offers a loan and advance facility to its employees. The intent is to make funds available to employees facing a genuine emergency who don't have other sources of money to draw on, and to support employees who need personal finance but can't get a loan from outside financial institutions.

Purpose

This policy describes the provisions for providing loans and salary advances to employees of [Company Name].

Scope

This policy applies to all employees under permanent employment. It doesn't apply to employees on probation, or employees serving notice of dismissal.

Definition

Emergency: For this policy, an emergency is an unforeseen circumstance that calls for immediate action and isn't likely to happen again. Examples include, but aren't limited to:

• A delay in payroll due to a payroll calculation error
• Theft of the employee's funds
• Medical expenses for the employee or a close family member
• Funeral expenses for a close family member

Emergencies do not include:

• Inability to pay routine expenses or recurring bills
• Inability to pay holiday or vacation expenses
• Inability to pay vehicle registration

Close family member: Close family members include an employee's:

• Spouse
• Child
• Domestic partner
• Child of a domestic partner
• Sibling
• Parent
• Grandchild
• Grandparent
• In-laws in the above relationships
• Step-relatives in the above relationships

Limitations to Loan

Emergency loans will not exceed [Amount]. Within a [Time Period] time frame, an employee may take up to [Number] emergency loans. If a previous loan is still unpaid, the employee can't take out another emergency loan.

Provisions Regarding Repayment of Loan

• The maximum repayment period is [Time period].
• The employee is liable for an interest rate of [Percentage].
• The employee must repay a minimum monthly amount of [Amount].
• Monthly payments are due within [Number] working days of the date on the promissory note.
• Missing that date results in a late fee of up to [Late Fee Amount].
• There's no penalty for repaying the loan early.
• Any outstanding loan amount is due in full when employment ends.

Procedure for Attaining Loan

An employee applying for a personal loan gets the details from HR. After reviewing the nature of the emergency, [Position of the Person] approves the loan and decides the amount. The employee and [Position of the Person] then sign a contract setting out the full terms of the loan. Where needed, the employee may also be asked to sign an automatic payroll deduction agreement as part of the promissory note.

Other Loans

Personal Loans

• The amount given will never exceed the employee's net monthly income.
• Repayments will not exceed [Percentage] of the employee's monthly income.
• The loan is paid out within [Number] days of approval.
• An employee can't take a personal loan if a previous loan is still unpaid.
• The employer and employee sign a deed setting out agreed terms, and repayments are deducted from salary as agreed.
• All loans must be paid in full when employment ends.

Advance Salary

• A salary advance will not exceed the sum the employee is otherwise owed, after adding unpaid leave and deducting other legal dues.
• Any salary advance must be fully recovered by the end of the month it's advanced in.
• Employees on initial probation aren't eligible for an advance.
• Both parties sign a legal document covering the advance.
• An employee can't get a salary advance if a previous loan or advance balance is still unpaid.