Employee Loan Deduction Agreement

The employer can control the repayments of a staff loan, unlike a debt certificate in which the borrower has control of the repayments. The credit or debt contract below also provides that the full amount is deducted when the worker terminates. However, this can be seen as an acceleration of debt repayment, i.e. a deduction of an amount greater than the agreed weekly/monthly amount, which may be illegal in your jurisdiction! An employer does not wish to participate in the budgeting of its employees or manage their finances, so there should be a directive on credit for staff and loans must be responsibly extended by the employer, for example: B.: A moving loan for workers – The company can pay the moving expenses in advance, but if there is a contractual agreement for the worker to reimburse, it is up to the employee to reimburse the agreed amount. You should indicate the reason for the deduction, for example. B a cash credit or an advance on a salary or a purchase of shares by the company, etc. However, an employee may have personal reasons for applying for a loan from the company (in case of unforeseen expenses, emergencies or difficulties) and is not obliged to disclose the reasons in detail. The employer would therefore be well advised not to lend beyond the weekly or monthly salary. A more extensive installment credit agreement should be established for long-term loans or large loans that can be maintained beyond the duration of employment.

Therefore, in order to guarantee the repayment of a loan when the employment relationship ends for any reason, the employer should include in the employment contracts a clause stipulating that it is entitled to make deductions from the worker`s wages for various purposes, including the repayment of an outstanding loan. A worker may be required to take out a loan from the company under which the employer can deduct from wages. The process makes it necessary to formulate a credit agreement that sets the amount of the loan and what should be deducted from the salary. By signing the loan agreement, the employee confirms that the loan has been obtained and allows the employer to make deductions from the salary on the agreed date. The employee`s loan agreement makes it legal for the employer to make deductions from the worker`s salary to repay the loan, especially for the jurisdiction where unauthorized deductions from the paycheck are illegal. The presentation of an employee credit agreement allows the employer to easily establish a binding agreement by filling only the spaces. In order to cover the event that the worker`s final salary is not sufficient to recover the full amount of the outstanding loan, the loan agreement should include an obligation for the worker to make a separate payment to the organisation within a specified period after the termination of the employment contract or to repay the outstanding amount according to a schedule agreed with the employer. The loan agreement should specify that the organization may take legal action to recover the outstanding amount if the loan is not repaid in accordance with the agreement and, where applicable, an agreed repayment plan.

Obtaining loans to employees to obtain shares in a business is considered a benefit to the worker and may be taxable. You should consult your financial advisor or business controller on how best to structure this type of credit agreement. If the employer agrees to make a loan, the details of the agreement are usually set out in a separate written loan agreement. It should be made explicitly clear that any outstanding loan may be deducted from the worker`s final salary and that, in order to avoid doubt, wages, holiday pay, overtime, commissions and bonuses (but not necessarily to be limited to them) should be further defined. . . .