Documentation required when advance taken on salary

[Dave A]

I am not sure if you can issue a loan, even if it is a zero interest loan, if you are not registered as a financial institution. This was phased in with the NCA. It must also be declared on his/her wages, if it is a zero interest loan, as SARS sees this as a benefit to the employee.

The NCA does allow for staff loans, and you'd have to be a pretty big operation to be required to register as a credit provider on the basis of staff loans alone.

Secondly, giving loans to employees is a bad practice

It certainly must be approached with caution, and I strongly suggest you put a clear company policy in place on the issue.

Personally I apply the following guidelines:
The repayment schedule must be agreed between employer and employee before the loan is granted.
I will not advance more than 50% of the employee's basic monthly salary if a permanent employee.
I will not advance more than 50% of what is already due for time worked if an employee under probation, temporary, etc.
Repayments may not take longer than 6 months.
Repayments should not exceed 10% of earnings.
No further advance will be given until 3 months have passed since the last loan was paid off (except for extreme emergencies).
The employee must have a valid reason for requiring the loan (for example a deposit on a TV does not count as valid - for that I expect the employee to save first ).