Immigration Accountability Executive Action: Have a policy regarding company loans

President Obama’s executive action on immigration will come with a financial cost, including government filing fees and attorneys' fees, and employees often look to their employer for financial help. As an employer, you must first determine if you will or will not issue loans to your employees. After you have made a decision, you will need to ensure that you have a policy. If you currently do not have a corresponding policy, it is important to establish one now. A uniform, non-discriminatory employee lending policy can protect an employer legally and provide a useful framework for handling employee requests for loans. Even if the company will not loan money, it needs a policy saying as much.

Should you decide to issue company loans, the following considerations are strongly encouraged to be included in your company loan policy:

  1. The COMPANY has the right to offer loans on a case-by-case basis.
  2. The employee’s past and present performance will be taken into consideration (i.e. employee must not be on any type of disciplinary action).
  3. Loans can be based on how long the employee has been with the company.
  4. Employee agrees to have loan repayment deducted from his/her wages.

The policy may also include:

  1. Specific criteria on circumstances under which loans may be offered.
  2. The process for evaluation of the request.

It is also recommended that employers include a standard clause stating that:

  1. Employers are responsible to pay even in the event of termination.

In addition to the previously mentioned suggestions, here are some important reminders regarding an employer's policy on employee loans:

  • Get it in writing. Always document the terms of a loan. We strongly encourage employers to create a promissory note stating the terms of the loan. This promissory note should be on a separate acknowledgement form that states that the employee authorizes the employer to deduct specific repayment amounts from his or her paycheck. (i.e. In Texas, an employee must agree in writing to allow deductions to be taken from his/her check.)
  • Stay honest in bookkeeping. Be diligent and honest in keeping records. Loans are not taxed, and it is illegal to disguise wages or bonuses as loans for tax purposes.
  • Setting the amount. An employer should only lend money that it can afford to lose. Employers should set an annual cap on the amount of money that an employee can borrow.

Similar to the Service letter policy, the company loan policy should apply to all employees. Click here for a sample company loan policy


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