Employer can provide loan for employees - exempt employee loan template
Purposes vary: A company may lend money to its employees, for example, to ensure that employees are able to meet their outgoings. This might be as a result of their usual salary payment date being changed for any reason, to fund the cost of a season ticket for public transport, or to help an employee during a period of financial hardship.
Making loans ordinarily: Companies need to be careful when making loans to individuals as there are specific rules that apply to protect individuals or 'consumers' in relation to loans and other financial arrangements. If those loans are breached, then the consequences for companies can be quite severe.
Exemption allows loans to employees: There is an exemption to the above rules for loans made by UK companies to UK employees where the main purpose of the loan is to provide a benefit for an employee, rather than to generate a return for an employer. For this reason, a loan to an employee that is intended to benefit from the exemption must not attract interest at a rate which is more than 1% above the base rate of a specified bank (usually the Bank of England). In this instance, you would need to use an exempt employee loan agreement.
What matters does Docue’s exempt employee loan template cover?
Lawyer-made model clauses: Docue’s exempt employee loan template covers, among other things, the following matters:
- Loan and its purpose - this section includes the obligation to make the loan and the purpose for which the employee is entitled to use the loan monies.
- Repayment - the section sets out the terms on which the loan being made under this agreement must be repaid, including the number of instalments and repayment amounts.
- Interest - this section sets out whether any interest is payable on the loan amount and, if so, the level of interest payable.
- Costs - this section makes it clear that the employee will be responsible for the employer's costs, in the event that the loan is not repaid and the employer has to bring a legal claim to recover the loan.
- Assignment and transfer - this section makes it clear that the employee cannot assign or transfer any of their rights or obligations under the agreement.
- Events of default - this section states that the borrower will automatically default (breach the loan agreement) if any of the listed events are to happen. Upon the occurrence of an event of default, the lender has the option to call in the loan immediately and terminate the agreement.
- Notice - this section sets out how and where notices under this agreement must be delivered.
- Governing law and jurisdiction - this section makes it clear which law and jurisdiction applies to the interpretation of this agreement.
Why Docue?
Easy to use: In order to create your exempt employee loan agreement with confidence and speed, simply click through the intelligent tick box options and text box answers and you’ll have a comprehensive, tailored, and ready-to-use agreement in no time.
Guidance notes: Lawyer-drafted guidance notes are there to guide you through the contract creation process and help you know which answers to pick for your situation.
Full contract process: Signatures can be collected electronically, and all contracts you make are saved in your company's own contract account.
Tags: exempt employee loan template, exempt employee loan agreement template, employee loan agreement, loan to employees, unsecured employee loan
