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Employee Emergency Loans - Does anyone's company do this? If so what are the guidelines

star65star65 3 Posts
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Our company has been giving out emergency employee loans for the past 10 years or so on an as needed basis. We have employees sign a legal loan document, and the loan repayment comes out of payroll deductions, and must be paid back within one year's time. Due to the economic situation, we are receiving these requests much more frequently. As a company we are also experiencing the financial pressures of the economy and have been tightening our belts. We would like to formalize this procedure in writing to all employees with stringent guidelines. I am looking for any information on how your company handles these situations. Any help is appreciated.
Thank you.
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Comments

  • 4 Comments sorted by Votes Date Added
  • sonnysonny 2,117 Posts
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    Might want to take this opportunity to stop the practice all together. Am wondering what you do when employee leaves within the year. I think it's a nice concept but not a good one. Just me.
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  • KSR6450KSR6450 574 Posts
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    I agree with Sonny. The legalities involved in collecting on a 'non-performing' loan are numerous. If this is an unsecured debt then good luck collecting should the employee leave.
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  • star65star65 3 Posts
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    We have the employees sign a legal loan document, which states that if an employee were to leave our employ we have the right to deduct it from any money owed to the employee. So, they in effect agree to our garnishing their wages owed. In all the years we have done this, we have never had any issues in this regard. We also cap the loan amounts and give them one year to repay it. It is just time for us to really define the parameters of the loans, that is why I need to formulate a specific policy. I have found several sample policies on SHRM - thanks for the replies.
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  • HR HatHR Hat 73 Posts
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    We have an emergency loan policy as well. We do use a loan agreement. Having such a policy has it +'s and -'s. The big plus is that the few employees that use it really, really appreciate it. Most users are long-term employees.

    I don't have any specific guidelines to share but ours is not a "guaranteed you'll get the loan" kind of thing. 3/4 of our policy basically says we're not a bank, we can't always do this, etc. We also limit and/or withdraw the benfit for repeat users.

    Jim

    I
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