Loan Policy

Loan Policy

Payroll / eTorQue

The purpose of this policy is to provide a guideline as to the circumstances under which the company provides loans, the application procedure that needs to be followed and then the payback process. The company must remember that the National Credit Act must be considered when Loans are concluded within the Course and Scope of an Employment Relationship.

Section 40(1) of the Act provides that where a company has at least 100 credit agreements or a total principle debt owed to it, under all outstanding credit agreements, that exceeds the threshold of R500 000, then a company will be obliged to register as a credit provider under the Act.

It is important to note that the company is not in the business of providing short-term loans. The EXCO do however acknowledge that there are circumstances that may necessitate an employee being assisted through a difficult financial time. With this in mind, it is the company policy that loans will only be granted in the following circumstances:

Medical or family emergency

  • Hospitalisation of employee, spouse or children.
  • High medical expenditure incurred by employee, spouse or child.
  • Repatriation of employee, spouse or children as a result of death or injury.

Qualifying tertiary education / development

An employee registers for a recognised tertiary qualification or industry approved course with the aim of improving their skills, knowledge and value to the company.

Relief of financial pressure

Under exceptional circumstances, the employer, after considering all the facts, may provide a loan to provide financial relief to an employee. Employees are however cautioned against acting financially irresponsibly knowing that they will be granted relief by the employer.

Should an employee believe that they have circumstances that may warrant the granting of a loan they must make an application in the format required and it will be considered by the management team.


The employee will be required to follow the procedure laid out below to be considered for an approved loan:

  • The employee must complete the Loan Application Form and attach the appropriate supporting documentation detailing the expenses wishing to be covered and a schedule of fixed monthly income and expenses.
  • The employee must also complete the Acknowledgement of Debt form.
  • The completed paperwork must be given to the Managing Director / Financial Director for consideration / approval.
  • The approved Loan Application Form must be handed to the HR / Payroll Department before the monthly payroll cut off for the necessary deduction to come off the employee’s salary.

Loan Terms and Conditions

  • Applicants must sign an Acknowledgement of Debt form to confirm their liability to the company.
  • Applicants must have a leave value credit in excess of the loan amount.
  • Applicants may only have one loan in place at any one time.
  • The maximum loan value: The monthly loan repayment value may not be more than 20% of the employees monthly Cost to Company figure.
  • Employees with existing loan garnishees and external loan repayments will be excluded from this loan scheme unless management make a specific exception in a particular case.
  • The loan amount or loan period may not be increased during the loan period. Future loan applications will be considered on a nil balance only.

Interest Rate

  • Interest will be levied on the loan. This loan rate will track the cost of capital to the company.
  • In cases where loans are provided for recognised study purposes the Seventh Schedule to the Income Tax Act allows for no interest to be levied (without there being a fringe benefit implication). The non-charging of interest in these cases will be at the discretion of the EXCO.

Employees Tax – Fringe Benefits on Loans

Where interest is levied at a rate lower than the SARS official rate of interest (which varies from time to time), the employer will be obliged to tax such interest as a fringe benefit through the payroll on a monthly basis.

No value shall be placed on the benefit derived in consequence of –

The granting of a casual loan or loans if the aggregate of such loans do not exceed the sum of R3 000 at any time. The loans contemplated in this exclusion are short-term loans granted at irregular intervals to employees and not all loans merely because they are less than R3 000. A taxable benefit would arise if the loans were granted on a regular basis to all employees or a certain category of employees notwithstanding the fact that the loan does not exceed R3 000.

The granting of a loan for the purpose of enabling the employee to further his / her own studies.

If a financial institution such as a bank provides loans to its employees at the same rate as to the customers of the institution on the same conditions and under the same circumstances, no taxable benefit will accrue if such customer rate is below the official interest rate.

If a low interest or interest free loan is provided to a director of a company or to a member of a close corporation, no taxable benefit will accrue if such loan is, for example, provided only as a result of the director’s shareholding and not in respect of any services rendered. In such a case, the interest on the loan will not be deductible in the hands of the company or close corporation.