Dear member,
In many companies, when loan is given to the employees, they do not charge any interest. However, they just restrict the loan amount to the one month's gross pay and repayment is done in maximum 5 instalments.
Few companies link the payment of instalments to the length of service. Higher the length of service more the instalments with maximum being ten.
Your primary query is on charging the interest on the loan amount. However, may it be noted that if you give loan with interest, the interest has to be lower than what banks or authorised financial institutions charges. If the interest is low then only it can be considered as soft loan. However, it will increase your administrative burden also. Therefore, my recommendation is telling employees to take loan from the bank and you may pay interest part of the loan for the first few months. Again for this arrangement also, you need to have an exclusive agreement. However, in the agreement you may include a clause that company will the interest provided employee has works for at least 20 working days. Otherwise, the company will take responsibility for the payment of the portion interest that month. By chance if the employee separates, whatever reasons may be, the company will not pay the part of instalment after the separation.
In case, if you enter into the agreement as suggested above, then amount disbursed will become taxable amount. Therefore, the portion of EMI has to be routed through monthly payslip.
Lastly about maintaining anonymity. If you wish to get advice from seniors, then courtesy demands disclosure of your name and designation. The kind of query that you have raised does not merit protection of identity. You could have been heedful on this count.
Thanks,
Dinesh Divekar