Employees can be given loans for their emergency requirements or important life events, if the financials of the company permit the same. Life circumstances or emergencies generate the requirements of such loans. It is surely a good thing to do, but care should be taken to make sure that it does not burden the company financially and also it is not misused. Following guidelines may help:
- A loan policy must be framed, communicated and implemented in the company. Any loan to the employees may be given only based on this policy. Make exceptions only in the exceptional cases.
- The purpose of the loan must be ascertained. Loan may be given for the needs and not for the wants.
- Also, it must be made clear to the employees that the loan will be at the discretion of the company and it is not a matter of right.
- The highest amount payable to an employee as a loan must be communicated clearly.
- If required, some interest must be charged on the loan given.
- Ideally, a loan should be given to the employees who have completed at least a specific number of years in the company.
- Repayment of the loan must be fixed at the time of giving the loan and it must be executed as agreed.
- If possible, automatic deduction of such a recovery installment from the salary every month must be arranged and executed.
- A regular update of the balance loan amount must be given to the employee.
- Some valid security document or some other such thing must be procured as a guarantee to ensure seriousness of the repayment. Also, somebody must be entrusted with the safe custody of such security documents.
- At the time of the employee leaving the company, his balance loan amount must be checked and it must be deducted from the full and final payment to be given to him.
- We can hold his final clearance till he repays the loan completely.
- It is observed that if an employee leaves with some unpaid loan, the chances of a recovery of that loan become very slim. So, it is better that it is claimed back when the employee is still accessible to the company.
(Expert advice to GROW your business wherever you are, whenever you want.
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