Emergencies happen, and if you need to borrow money quickly, approaching your employer for a loan or salary advance may be an easy option. Before you ask, however, you should understand how these loans or advances work and what the implications are.
If your employer offers workplace loans, there are two options:
owing is deducted from your salary on next payday. There is no interest charged, and the arrangement falls outside of the National Credit Act.In accordance with the National Credit Act, your employer should do an affordability assessment to determine whether you can afford to repay the debt. As part of this 
process, you will be asked to list your income and expenses.
Your employer may also do a credit check to see your history of repaying debt, but they may be more lenient than other lenders because they know you personally.
A formal agreement should be drawn up for your signature, and the installments will be deducted from your salary.
There are no minimum or maximum amounts. Your employer will determine how much money is available for a workplace loan and will consider your ability to repay the loan based on the affordability assessment the employer conducts. The amount they are willing to lend you may be less than your requirements.
A workplace loan, like any other debt, can enhance or damage your credit score, depending on how well you manage it.
As the installments are deducted directly from your salary, a consistent payment history will benefit your credit score.
If the aggregate amount of your workplace loan is less than R3 000, there are no tax implications.
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EDUCATION LOANS |
If the aggregate amount exceeds R3 000, the loan or the loans may be deemed as a fringe benefit, which increases your taxable income, and you will pay more tax. This additional taxable amount depends on the size of the loan as well as the interest rate your employer charges you.
It is the difference between the official interest rate and the interest rate you are being charged.
 WORKPLACE LOANS |
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| Benefits | Drawbacks |
| The loan application process may be simpler, as your employer has some of your details already. | If the aggregate or total amount of the loan exceeds R3000, your tax liability may increase. |
| You may pay a lower interest rate than if you borrowed from an external lender. | There may be a limit on the size of the workplace loan, falling short of your needs. |
| You may be able to access the money quickly. | If something goes wrong, it could damage your relationship with your employer. |
| If you battle to repay the loan, your employer may be more understanding than an external lender and allow you to renegotiate the repayment terms. | Your employer may specify what the loan can be used for, such as for personal or family emergencies. |
| The installments are deducted from your salary, making life easier. | If your employer knows your personal financial challenges, it may affect how they perceive you and ultimately your career. |
Before approaching your employer for a salary advance or loan, find out what they offer.
Compare the workplace loan interest rate, fees, and repayment terms to those of other credit providers.
Ensure that you can afford to repay the loan while maintaining your living costs.
Don’t use a workplace loan to pay off other debt but rather address your debt problem if you’re struggling to maintain your debt repayments.
Consider what would happen if you changed jobs, were retrenched or dismissed before you’ve repaid the loan.
Make sure you fully understand the loan agreement terms and ask questions if necessary.
The loan agreement must be in writing and signed by both you and your employer.
to further their education are not considered a fringe benefit.