Employee Loan Agreement, Copperleaf Joinery and Bilal Hassan
Employee loan agreement template repaid by payroll deduction
An employee loan agreement template records money an employer lends to a staff member and how it comes back. When repayment is by payroll deduction, Australian law requires the employee's written authority, and the agreement has to say what happens if they leave or withdraw that authority before the loan is repaid.
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Section by section
What each section is for, so you can keep the ones you need and drop the rest.
- Letterhead and parties
- Copperleaf Joinery ledger letterhead with ABN, the agreement date and the reason for the loan.
- Summary
- Stats for $3,000 lent, no interest, $250 each pay and the final deduction on 18 March 2027.
- 1 to 3. Loan and repayment
- The payment on 9 October, no interest or fees with fringe benefits tax borne by the employer, and 12 deductions.
- Repayment schedule
- A two column schedule of 12 pay days, deductions and balances from $2,750 to $0.
- 4 to 7. Early repayment and changes
- Repaying early, unpaid leave and hardship, the balance on leaving and withdrawing the authority under section 324.
- Written authority to deduct
- The employee's own authority for the 12 deductions and the balance from final pay.
- Signature blocks
- Two parties, the director for the employer and the employee.
How to adapt this document
For a salary advance repaid within one or two pays, keep the authority paragraph and the balance on leaving clause but replace the schedule with a single row, and remove the hardship clause, which matters only over a longer term. For a larger loan with interest, add the rate, how interest is calculated on the reducing balance and a column for interest in the schedule, then check the fringe benefits position against the benchmark rate. For an employee on an award, make sure no deduction takes their pay below the minimum the award requires for that pay period.
Which law the terms follow
The artifact is written for a New South Wales employer in the national system. Section 324 of the Fair Work Act 2009 allows deductions authorised in writing by the employee and principally for their benefit, and the Fair Work Ombudsman notes that an employee can withdraw an authority in writing at any time. The interest free loan is a fringe benefit under the Fringe Benefits Tax Assessment Act 1986, with the taxable value set by the statutory interest rate the ATO publishes each year.
What makes this document work
Every pay day and balance is printed
Twelve fortnightly deductions of $250 from Thursday 15 October 2026 to Thursday 18 March 2027, each with the balance after it, from $2,750 down to $0. The schedule reconciles to $3,000 and lets the employee match every payslip to a row.
The written authority is a separate, specific paragraph
The employee authorises $250 on each of the 12 pay days, and the balance on leaving up to $3,000 less what has been deducted, in his own words, and confirms he can withdraw it in writing. That is the specific authority section 324 of the Fair Work Act requires.
The awkward cases are settled in advance
A deduction falling in unpaid leave moves to the end, hardship allows a smaller deduction, leaving makes the balance due from final pay with anything left repayable within 30 days, and withdrawing the authority switches repayment to bank transfer on the same days.
Questions people ask
Can an employer deduct a loan repayment from wages in Australia?
Yes, if the employee authorises it in writing, the deduction is principally for the employee's benefit and it is not unreasonable. Section 324 of the Fair Work Act sets those conditions. Repaying a loan the employee asked for meets them, provided the authority states the amount and the employee can withdraw it.
Does the written authority need a specific amount?
Yes. The authority must say what is being deducted, which is why this one gives $250 on each of 12 named pay days. For the balance on leaving it states a ceiling, the $3,000 lent less the deductions already made, so the employee knows the most that could come out of the final pay.
What if the employee withdraws the authority?
The employer must stop deducting, because an employee can withdraw a deduction authority in writing at any time. The debt does not disappear. Clause 7 switches repayment to bank transfer on the same scheduled days, so withdrawing the authority changes how the loan is repaid, not whether it is.
Is an interest free loan to an employee taxed?
It can be. A loan to an employee at no interest, or below the statutory benchmark rate, is generally a loan fringe benefit, and the employer may owe fringe benefits tax on the difference. Clause 2 makes that the employer's cost and says it is not recovered from the employee.
What happens to the loan if the employee resigns?
The balance becomes due. Under the written authority it is deducted from the final pay, and anything the final pay does not cover is repaid within 30 days or by an instalment plan agreed in writing. Setting this out at the start avoids a difficult conversation in someone's notice period.
Should the loan be kept confidential?
Yes. A staff loan is a personal financial arrangement, so it should be known only to the people who approve and process it and never mentioned in a reference. This agreement is kept with payroll records, and each payslip shows the deduction and remaining balance only to the employee.
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