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Petty cash, paycheck advances, and other financial options that were available from employers in the past are sometimes still available. Although new federal laws and local regulations have largely changed the way most people do business, it is still possible to find ways to make a loan to employee from an employer. A few ground rules apply so that the employer is somewhat protected from loss and the employee is given a fair rate of interest or other favorable terms for the loan.
Employment Loan Options
Employers have various options when it comes to finding ways to offer assistance to their employees. In addition to formal employee assistance programs that feature prepaid legal services, counseling, and financial analysis programs, some employers actually help an employee alleviate financial burdens by offering employer loans to employees.
This option increases productivity in the workplace by avoiding additional stressors in life when an employee loses focus on the job due to financial concerns. The flexibility of offering a company loan to employee also creates employee loyalty and helps prevent high turnover rates and even employee theft in some cases. Employee loans are a way of building mutual trust in the relationship between employer and employee.
Terms of Employee Loans
The terms and conditions of an employee loan agreement may vary among different employers, but they should absolutely remain consistent within a specific organization. There should be clear criteria in place that applies for every employee who is interested in obtaining an employee loan. Consistency ensures that the employer does not come under any scrutiny for failing to provide fair and accurate information or for creating the presence of prejudice toward a specific employee or group of employees.
There are other benefits to the employee for entering into an employment loan agreement. Having an organized contract in place will prevent an employee from being subject to changes in the agreement or from being put in a position where payment amounts unexpectedly change. Payment options may vary depending on the type of loan agreement, the employee salary, and the personal relationship between employee and employer. These types of loans offer a convenience for the employee and often do not require any type of credit check.
The employer loan to employee agreement will detail all these terms and conditions and must be mutually acceptable before both parties sign in recognition and consent. The importance of having an employee agreement before taking out any employer loan becomes apparent in the case of employment separation. This instance should be addressed in the agreement so that the employer is covered against losses and the employee has alternative payment methods if they were previously making payment toward the loan from their payroll deductions.