Considerations to be taken into account when an employer gives an employee a company loan.
It is legal in South Africa for an employer to grant an employee a loan, on the condition that the employer does not make any profit from the loan nor charge an interest.
It is prudent that an employer draft a written loan agreement, setting out the
- the employee’s details and I. D number
- date, month and year that the loan was made to the employee,
- the amount loaned,
- the reason for the loan
- whether the employee was eligible for the loan
- any documentation required by the employer to verify the reasons for the loan
- the number of instalments to repay the loan
- the confirmation that the instalment amount shall be deducted monthly from the employee’s salary until loan repayment has been refunded in full.
The written loan agreement is to be signed by both employee and employer, setting out clear guidelines for both parties to adhere to.
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