Everyone understands that small company owners wear several hats, but most people do not believe that includes functioning as lenders. According to the American Management Society, 직장인대출 ( employee loan) has grown widespread since 78 percent of American employees now survive on their salaries. Just 17 percent of individuals can rely upon a family member or friend for financial help.
Is it essential, however, to provide a loan to one of your employees? And, if you provide loans to workers, how can you do so while remaining committed? There are many variables to consider, which is why we created this guide. Here’s everything you need to know about work loans, including things to consider when choosing a business loan.
What Exactly Is an Employee Loan?
An employee loan is a money provided by a company to assist an employee. Employee loans, like personal and corporate loans, often include an interest rate and payback schedule. On the other hand, employee loan interest rates are typically low to cover the expenses of administering the loan program and any tax obligations that the employer may incur. The employee repays the loan by the repayment plan, which is often taken from their future income. As a result, employee loans should be prioritized for future employee wages.
Employee Loans Are Being Considered
Employers provide employee loans as a kind of employee perk. As with any extra benefit, the employer must have clear rules and processes in place, as well as comprehensive credit plan information. The following considerations should be considered while establishing an employee debt policy:
Conditions of the Loan: Will workers be able to get loans for any purpose or just in the case of a financial crisis? Are any papers, such as employee financial records needed to secure a loan? Is a loan available to all employees, or just those who have been with the business for a specific amount of time? These are the issues you must address when developing a credit policy for your workers.
The loan amount is: Set aside a specific amount to be utilized in the loan program if you are planning to offer a loan to workers. Determine how much you owe workers as well. You may choose a set sum or a percentage of the employee’s pay.
Loan duration: Employee loans, in general, have a short maturity period of at least two to three years. This is due to the difficulty of maintaining a loan fund if the loan is repaid over an extended time. When an employee chooses to quit your business before the loan is paid off, the issue worsens since specific local regulations do not enable the employer to collect the outstanding loan amount.
Method of payment The most frequent method of repaying a job loan is to decrease personnel. However, be sure that your state does not have any regulations preventing this pay decrease.
It is critical to have a letter of commitment when providing a loan to workers. An exchanged bill is a legal document that establishes your employee’s commitment to repay a debt. The loan conditions will be specified in the promissory note, including the amount to be paid, the frequency of payments, the interest rate, and what will happen if the employee fails to perform satisfactorily on loan.
The Advantages of Employee Loans
Giving workers a loan may have several advantages for your company, including:
- They were reducing financial stress, which causes your workers to be less productive due to financial worries. According to a survey conducted by the International Fund for Employee Pension Plans, 60% of respondents under financial stress claimed they couldn’t concentrate on work because of their worry, and 34% stated financial stress increased their unemployment and absenteeism.
- They are increasing employee loyalty and morale in a small company or office.
- It improves your company’s image as a company that cares for its workers.
- It increases staff retention while decreasing employee perks.