Employee instalment loan agreements

An employee undergoing financial hardship can ask his employer for a temporary loan or employee instalment loan. In these agreements, the employer will typically agree to advance an employee part of his salary and allow him to repay it over time.

Items covered

An instalment agreement loan between an employer and employee should clearly outline the loan's purpose, the terms and any applicable interest rate charges. The paperwork should also specify repayment terms in the event of termination or resignation. To be a legally binding agreement, the loan must be signed by both parties.

Repayment method

The instalment loan agreement should include methods of repayment. In most cases, the employer will opt to deduct the instalment amount from the worker's salary each pay period. However, employers can also opt to receive a payment directly from the employee. In either case, late payment fees and accrued interest clauses should be added to the agreement.


Employers that extend credit to employees can end up in dicey situations, especially if the employee is terminated before the loan balance is paid. Because of this, few employers will make an advance on an employee's salary. Some employers do offer the service to help employees cover big upfront costs, such as train season tickets.

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