Employer's loan


Sometimes an employee has an increased need for money and turns to his or her employer for a loan. There are various reasons for this. They may want to take an expensive trip abroad, buy a car, a house or renovate it. Sometimes their needs may be more modest and aimed at coping with a difficult month financially, such as a divorce or the sudden illness of a loved one. The employer's loan must be distinguished from the salary advance.

Salary advance

If the employee is really in need, he or she can ask his employer for a salary advance. The employer must grant the advance under specific conditions. The amount is limited. The salary advance will be deducted from the employee's next salary.

Employer's loan

If the employer gives an amount that does not necessarily correspond to a basic need of the employee or gives a particularly large amount, it is not a salary advance but a loan.

The distinction between a salary advance and a loan from the employer is crucial. It will determine whether the employer has an obligation to pay this amount and how it will be repaid.

Repayment of the loan

A loan must necessarily be repaid by the employee. It is advisable to conclude a written agreement specifying the terms of repayment, in particular to prevent risks in the event of early termination of the employment relationship before full repayment. 

When the loan is repaid by offsetting monthly payments against the employee's salary, special rules apply. The amount that can be offset is limited by law. 

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1 Mar, 2010 byMarianne Favre Moreillon