Employee Loans: What You Should Know
Falling behind on your bills is not fun, but is all too commonplace in today’s workforce. In a report published by CBS in 2016, roughly 63% of Americans are living paycheck to paycheck, where an unexpected expense totaling as little as $500 could be financially disastrous. In many cases, employees are looking to their employers for loans, helping them make ends meet. But before shelling out any cash, employers need to understand the ramifications of this act. There are some definite positives to helping your employees in their time of need, but understand that this comes with risk.
The benefits of loaning employee’s money, beyond the obvious of easing stress caused by financial woes, reaches far beyond that of monetary value. With the employer at the heart of the loan, he/she is able to set more favorable terms, as opposed to payday loans. Employee morale and loyalty also greatly benefit from a boss who cares, thus causing higher retention rates, which we all know is the cornerstone for any great company.
But what happens when employees struggle to pay back the loan? What happens if they disappear altogether after you shell out money that they so desperately needed? Then arise questions of taxation, who is liable and for how much? These are serious concerns that employers must confront when trying to help an employee. If you don’t have the answers to these questions, not only could you be out the cost of the loan, but now you may have to incur penalties and legal fees. So, how can an employer still maintain his/her saint like status without exposing themselves?
Groundbreaking companies like TrueConnect Loan are allowing employers to offer safe and affordable loans to employees. The TrueConnect Loan is free for employers to offer and requires very little administration. Qualified employees get access to small dollar loans (from $1000 – $3000) through Sunrise Banks that are repaid through automatic payroll deductions. Employees do not need a credit history, but can only borrow what they can pay back with 8% of their paycheck to help insure a successful loan repayment. Payment history is reported to credit bureaus, so borrowers with on-time payments may be able to build up their credit scores. All TrueConnect Loan borrowers get 6 free credit counseling services from LSS Financial Choice, a federally accredited credit counseling program.
Charlotte Payroll is a premier payroll company for your “one-stop” payroll, human resources and insurance needs. As part of our commitment to our client’s success, we are making TrueConnect Loan available to all clients to assist with employee retention and productivity.
Charlotte Payroll offers a full in-the-cloud experience that maximizes efficiency. Our SaasHR platform can be tailored for businesses of any size to run on any device. Payroll can be processed in minutes, so you can focus on running your business. Schedule an appointment with one of our sales consultants to tailor a solution that fits your needs. Contact us today at (704) 887-5511.