Post a new topic
    7 Replies Latest reply on Aug 12, 2008 11:17 AM by wealthoffice

    Employee Loans

    HRINNC Newbie
      We have a policy that says that we do not allow employee loans; however, being a small company, things sometimes get personal. Do you have any ideas on good ways to say no under pressure other than policy doesn't allow it?
        • Re: Employee Loans
          Iwrite Pioneer
          I learned from a very good CEO the real power of "no."

          He would say, "never explain or apologize for your 'no.' Tell the person 'no' without an explanation. Then after a short pause, tell them why without placing emotions or feelings in it. Trying to explain your 'no' right away sometimes sends the signal that you are not sure about your answer."

          Is this a new policy? Did you ever offer employee loans? Have you explained why you have this policy?

          The best way is to communicate the reason for the policy and make sure everyone understands.

          This is a hard subject. Good luck.
          1 of 1 people found this helpful
            • Re: Employee Loans
              HRINNC Newbie
              Thank you so much for your response. I really appreciate you taking the time to respond to my question.

              The policy came out about a year ago. We used to offer employee loans, but then everyone was asking and some weren't paying them back timely or at all. We pretty much just said that we would no longer offer employee loans. Now the employees are begging and going to the president for a personal loan. He has done this on occassion due to their persistence, but doesn't want to. I was trying to brainstorm ideas other than referring back policy to nip this in the bud. He always mentions the policy, but still gets guilted into saying yes. I thought I could prepare a list of reponses for him that would help him when the situation arose.
                • Re: Employee Loans
                  LUCKIEST Guide
                  Add the following to your list of responses for him that would help him when the situation arose.

                  Employees may borrow an amount up to XXX of their annual base salary.The loan will be repaid through payroll deductions over a 12 month
                  Only one loan may be outstanding at
                  any point in time.
                  Interest on the loan will accrue at a constant rate based on the prime rate at the time of loan
                  Employees leaving prior to the end of the 12 month loan repayment period will have
                  the loan balance
                  deducted from their final paycheck and employees must
                  pay any remaining balances prior to leaving.

                  Again LUCKIEST
                  1 of 1 people found this helpful
              • Re: Employee Loans
                LUCKIEST Guide
                Welcome to this web site. Employee Loans, Good Subject.
                You have a policy. You do not allow employee loans. End of subject.
                Except as you say things sometimes get personal. Do you have a employee handbook??
                Maybe now is the time to start an employee handbook.
                Keep it simple and it will grow as your company grows.
                Do you know about SCORE??. SCORE helps business GROW and SCORE is FREE
                Good luck, LUCKIEST
                1 of 1 people found this helpful
                • Re: Employee Loans
                  Lighthouse24 Ranger

                  I'd consider forming a credit union (or affiliating with an existing one). When we have to tell someone "no," it's good to be able to offer an alternative. A credit union would provide that, and being member-controlled, it would make employees responsible for sustaining the solvency of the deal (if the money wasn't available to lend, or if the perceived risk was too high, they'd be saying "no" to themselves in effect).

                  There are some very large employee credit unions that began years ago with only a handful of people in exactly this way. Just something to look into maybe . . .

                  Best wishes.
                    • Re: Employee Loans
                      Iwrite Pioneer
                      Another idea is to form a special fund, that each employee can contribute to and that can be used to help employees in times of need. We had such a fund at a small agency where I once worked. Each pay period whatever amount you, the employee had decided to give was deducted from your check. A panel of employees would whether they would help and how much.

                      I want to point out that nothing you do will help if they can go to the president and plead their case. No policy or answer will stop that. The president has to learn to say "no." Whatever solution you come upon has to have his full support or the employees will just go to him. It is like with children, they have to learn that one parent's answer is supported by the other parent.

                      I think the suggestions on how to tie the loans to the paycheck could help prevent the pay back issues.
                    • Re: Employee Loans
                      wealthoffice Newbie
                      One plan I manage had a profit sharing plan for years, and the owner often fronted payroll advance or other loans to the employees.

                      We converted the plan to a profit sharing plus 401k and add a loan provision. The employee could then borrow up to 50% of their vested balance and pay back over 5 years through thier paycheck.

                      If they left and did not continue the payments, it simply becomes taxable and the owner has no liability.

                      Hope that may help you. Good luck.