money to an employee

Am I allowed to lend money to an employee?

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Know that your business is not a financial institution. Granting a loan to an employee is not prohibited, but must remain exceptional.

Yes, you can lend money to an employee, but be careful not to fall into the trap, the financial loan is neither a down payment nor a salary advance . It responds to very specific rules.

Other pitfalls can be avoided in labor law, Tissot Publishing offers you to download a selection of 10 questions/answers for free.

  • You can only grant a loan for social reasons.
  • the works council can also grant loans to your employees.
  • Loan granted to an employee: drafting a contract
  • The drafting of a loan contract is mandatory:

if the sum lent is greater than 1,500 euros when the loan is granted without interest;

However, for security reasons, it is advisable to draw up an agreement regardless of the amount lent.

The terms of repayment of the loan by the employee must be included in the contract:

amount of installments, mode and dates of payment;

an amortization schedule;

the interest rate to be repaid if you have agreed to a loan with interest;

clearly specified reimbursement terms, excluding deductions from the payslip ;

the fate of the loan in the event of termination of the employment contract.

The debts of the employee (loan contract) and the salary paid by the employer in return for his performance of work result from two separate contracts. You cannot make a payroll deduction on your own initiative.

provide in the loan contract the repayment terms (cheques, transfers) and avoid salary deductions.

The departure of the employee from the company does not make the loan immediately payable, unless this possibility has been provided for in the loan contract. Be careful to respect the 10% limit if you practice this salary deduction. This limit only applies to salary. You can therefore offset the balance of the loan with, for example, the severance pay due to the employee.

In the event of non-reimbursement of the loan by your employee, you will have to bring your request before the tribunal de grande instance.

Deposits and advances on salary: other possibilities to help an employee financially

The deposit consists of paying an employee the remuneration for a period of work already completed, but before the normal due date of his pay .

when you pay the salary on the last day of the month and an employee asks you to pay him half of his salary on the 15th of the month.

The advance on salary, unlike the deposit, is the payment of part of the salary while the corresponding work has not yet been carried out by the employee.

an employee, to deal with a problem of bank overdraft, asks you to pay him all of his salary, even though the first fortnight of the current month has not yet passed.

For more details on installments, salary advances and loans granted to your employees, Tissot Editions offers you their book ” Manage staff “.

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