Employer loans: The best tips for employees

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A Employer loans is a sum of money provided by the employer to the employee at comparatively favorable interest rates. This loan functions similarly to a installment loan from a bank, in which the time frame and the amount of the monthly payments are contractually agreed. To ensure that the loan is not seen as wages, it is essential that repayment, interest and collateral are specified.

A loan is a way for employers to retain their employees. After all, anyone who has to repay a lot of money will probably stay with the company longer until the loan is repaid. If the employee leaves the company before the repayment period has expired, both parties must clarify how the outstanding amount of the loan is to be repaid. The employer recognizes the interest income as operating income.

For the employee, the loan from the boss does not constitute taxable wages if it is granted at standard market conditions. If the employer loan is granted at more favorable conditions, the employee must pay tax on the non-cash benefit. Loans from the employer are often used to finance home ownership. It is important to note that the repayment terms and interest on the loan must be contractually agreed to ensure that it is not considered wages.

What are the benefits of employer loans?

An employer loan is a way for employers to retain their employees. After all, anyone who has to repay a lot of money will probably stay with the company longer until the loan is repaid. If the employee were to leave the company before the end of the repayment period, both parties must clarify how the outstanding amount of the loan is to be repaid. In doing so, the employer recognizes the interest income as operating income.

For the employee, the employer loan does not constitute taxable remuneration if it is granted at standard market conditions. If the employer loan is granted at more favorable conditions, the employee must pay tax on the non-cash benefit.

Employer loans offer several benefits to both employers and employees. Some of the most important advantages are:

For employees:

  • Access to favorable credits: Employer loans typically have lower interest rates than regular installment loans because the risks to the lender are lower.
  • Flexible repayment terms: Employer and employee can jointly agree on repayment terms that are acceptable to both parties.
  • Equity replacement: employees can use the employer loan to raise equity for financing, such as a home purchase.


For employers:

  • Opportunity to increase loyalty to the company: Employees who have taken out an employer loan are usually motivated to stay with the company longer. This is the only way they can repay the loan without any problems.
    Tax advantages: Loans granted are generally considered business expenses and may therefore be tax deductible.
    Opportunity to support employees: Employer loans offer employees the opportunity to improve their financial situation. Favorable interest conditions enable them to afford important purchases that they would not be able to afford without the loan.
  • Image improvement: Companies that offer their employees employer loans can build a positive image as a responsible and employee-friendly employer.
    Employee motivation opportunity: employer loans can serve as an additional incentive for employees and help increase their motivation and satisfaction.

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