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January pressures: Employee loans, salary advances, leave commutations

AS LIFE would have it, the month of December comes to bring the year to an end but at the same time, it comes with a lot of other activities.
Considering that December is associated with the festive period, some employers endeavour to pay the employees between the 15th and 31st of the month.
With some employees feeling highly loaded in their wallets and bank accounts, the only thing that comes next on the agenda is going on a spending spree.
It is a great thing to be hero-worshiped as the “big spender” or the “big buyer” who can make things happen.
Some employees even go on to borrow some more to spend and impress others, party, and have a great time.
As seasons come and go, the festivities also come to an end and some employees suddenly realise that they are in January, a month that comes with its own financial pressures.
Soon, the need arises to find money for fuel or bus fares, lunch, and bills for electricity among other things.
As if that is not enough, some children, and dependants have to start pre-school and grade 1 while others pass their examinations to go to Grade eight and 10.
Suddenly money must be found for school fees, uniforms, books, stationery, groceries, transport, food, and so on.
Some employees soon realise that they have bank loans, and there is no other option but to turn to their employer for financial assistance.
For those working in the human resources (HR) departments, January is a month for receiving a lot of applications for (a) loans, (b) salary advances, and (c) leave commutations.
Employers and their HR are advised to consider the following:
1. Have clear HR policies:
In addition to all other HR policies and guidelines, employers are supposed to ensure that they put in place proper policies and guidelines on salary advances and loans.
From the outset, employees should know when they can be eligible for such financial assistance, what rates, and even when they cannot access the same.
(a) Salary advances
Employees can apply to their employers to get a salary in advance and the same is then deducted in subsequent months to come.
Considering that the amounts involved in salary advance requests are usually not very high, they are mostly deductible within three months and can be extended up to six months.
(b) Employee loans
Where provided for, the employee can access a higher amount of money through staff loans which can be given by the company itself or facilitated through a financial institution.
Considering that amounts involved in staff loans are high, they are usually deductible over a long period of time as per the contract term or even as long as 20 years depending on the arrangements.
What employers and their HR need to do, is to ensure that the employee is within the allowable thresholds and they meet all set criteria.
(c) Leave commutation
It is important to understand that Section 15.(1) of the Employment Act, CAP 268 of the laws of Zambia provides that an employee accrues leave days at the minimum rate of two days in respect of each period of one month’s service.
Where the employer has not ensured that employees utilise their leave days and has allowed for commutation, employees can then apply to commute their accrued leave days for cash.
2. Predictability in application:
Policies pertaining to salary advances, loans, and leave commutation must be justly administered and uniformly applied so that all individuals are treated in a fair, equal and consistent manner.
Employers cannot make a mistake of being discriminatory in the way they give employees’ advances and loans.
3. Pay when approval is made:
Employers need to ensure that when the advance, loans or commutation applications have been processed and approved, they should be disbursed or paid to the employee.
When employees apply for financial assistance, they have pressing matters to sort out. To come and pay after a long time from the time of application and approval, such financial assistance might have lost its value.
Where the employer may be unable to pay the employee the approved advances or loans, the employer should immediately inform the employees so that they start to look for alternatives.
4. Make correct deductions:
When the employee gets a salary advance or loan, make sure that you make the correct deductions as when the same falls due.
Section 45. (1)(e) of the Employment Act, CAP 264 of the laws of Zambia gives employers the power to make deductions from the wages payable to an employee in respect of any amount agreed in repayment of a loan.
In closing, employers, whenever you have the ability to pay and have appropriate HR policies, endeavour to assist your employees through financial education as well as giving advances and loans where possible.
Financial assistance to an employee is a big motivation factor that can attract and return employees.
Employees who are less financially stressed are more likely to concentrate on their job and therefore become more productive, which is important for the company to reach its set performance targets.
With a motivated and productive workforce, well-run and successful companies end up contributing greatly to the overall sustainable national development.
The author is a human resources and leadership advisor.