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The Empuls Glossary

Glossary of Human Resources Management and Employee Benefit Terms

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Employee Loan

Employee loans, also known as salary loans or workplace loans, are financial products provided by employers to their employees. These loans allow employees to borrow money from their employer at a predetermined interest rate and repayment terms.

Employee loans are designed to provide convenient and accessible financing options for employees who may need extra funds for various purposes, such as personal expenses, emergencies, or debt consolidation.

What is an employee loan?

Financial assistance provided by employers to employees, usually at a lower interest rate, to address personal financial needs.

Listen, recognize, award, and retain your employees with our Employee engagement software  

What is the interest rate charged on employee loans?

Employee loan interest rates are typically lower than traditional personal loan rates, ranging from 0% to 6%. The specific rate depends on various factors, including:

  • Company policy: Some companies offer employee loans at a fixed interest rate, while others may offer a variable rate based on market fluctuations.
  • Employee's creditworthiness: Employees with good credit scores may receive lower interest rates.
  • Loan amount and term: Longer loan terms may come with higher interest rates to compensate for the extended repayment period.

How do employee loans work?

Employee loans are financial advances offered by companies to their employees. These loans are typically unsecured, meaning they don't require collateral, and are repaid through payroll deductions over a set period.

Here's how the process usually works:

  • Employee applies for a loan: The employee submits an application form, specifying the loan amount and desired repayment terms.
  • Company reviews the application: The company assesses the employee's eligibility, financial stability, and employment history before approving the loan.
  • Loan agreement is signed: Upon approval, both parties sign a loan agreement outlining the loan terms, including the amount, interest rate, repayment schedule, and late fees.
  • Loan is disbursed: The loan amount is deposited into the employee's account.
  • Repayment begins: Regular deductions are made from the employee's paycheck to repay the loan with interest.

How much can employees borrow through an employee loan?

The maximum loan amount available through an employee loan program varies significantly by company and depends on several factors, including:

  • Employee's salary: Higher earners are typically eligible for larger loans.
  • Company policy: Some companies set a maximum loan amount cap for all employees, while others may have tiered limits based on salary or position.
  • Employee's creditworthiness: Companies may offer larger loan amounts to employees with good credit scores.

How are employee loan repayments made?

Employee loan repayments are typically deducted automatically from the employee's paycheck on a predetermined schedule. This ensures consistent payments and simplifies the repayment process for both parties. The frequency of deductions can vary, with some companies making weekly or bi-weekly deductions, while others opt for monthly payments.

Are employee loans subject to any tax implications?

The tax implications of employee loans depend on the specific loan terms and the employee's tax jurisdiction. Here's a breakdown of potential tax considerations:

  • Interest paid on the loan: The employee may be able to deduct the interest paid on the loan as a miscellaneous itemized deduction on their tax return.
  • Loan forgiveness: If the company forgives any portion of the loan, the forgiven amount may be considered taxable income for the employee.
  • Tax implications of loan default: If the employee defaults on the loan, the company may be required to report the unpaid amount as taxable income for the employee.

It's essential to consult with a tax advisor for specific guidance on the tax implications of an employee loan in your individual circumstances.

Employee pulse surveys:

These are short surveys that can be sent frequently to check what your employees think about an issue quickly. The survey comprises fewer questions (not more than 10) to get the information quickly. These can be administered at regular intervals (monthly/weekly/quarterly).

One-on-one meetings:

Having periodic, hour-long meetings for an informal chat with every team member is an excellent way to get a true sense of what’s happening with them. Since it is a safe and private conversation, it helps you get better details about an issue.


eNPS (employee Net Promoter score) is one of the simplest yet effective ways to assess your employee's opinion of your company. It includes one intriguing question that gauges loyalty. An example of eNPS questions include: How likely are you to recommend our company to others? Employees respond to the eNPS survey on a scale of 1-10, where 10 denotes they are ‘highly likely’ to recommend the company and 1 signifies they are ‘highly unlikely’ to recommend it.

Based on the responses, employees can be placed in three different categories:

  • Promoters
    Employees who have responded positively or agreed.
  • Detractors
    Employees who have reacted negatively or disagreed.
  • Passives
    Employees who have stayed neutral with their responses.

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