Employee BenefitsHave you recently heard the term “company loan” and wondered what it was? A company loan is a loan provided by an employer to an employee. These loans can range from third party loans to loans paid out from the company’s finances. When the loans come from a third party, they are generally at extremely high interest rates and are for short term borrowing. Loans guaranteed by a company are usually lower interest, longer term and paid directly back to the employer through automatic payroll deductions.

These programs are being touted as the financial equivalent of a health and wellness program, as they often include financial education elements as well. The goal of these loans is to help employees address unexpected financial burdens or to help consolidate long-term, high interest debt into a single loan.

According to Renaud Laplanche, the CEO of Lending Club, a peer-to-peer lending start-up, this offering is a win-win for both the employees and companies. “The program we’re putting in place gives the ability for large companies with lots of employees to make loans to their employees and use their treasury reserves, on which they are earning like one or two percent, and put them to work,” he said in a recent interview. “At the same time, they would be offering a lower interest rate to their employees than what they’re paying on their credit cards or other loans they have. It’s really an HR benefit and recruiting tool.”

Is he right? Yes and no. In a perfect world, if employees paid loans back on time and no one defaulted then everyone would win. However, as HR professionals we know that there are regularly unexpected challenges with employees. When developing a company loan program, you need to spend time with both HR Consultants such as HR Shield, and attorneys, to ensure that you are developing an iron clad system.

Contact us today to start discussing the opportunity to develop a company loan program with your personalized HR Advisor!