Taking a loan from your employer? Pros and cons you should keep in mind

In a recent article published by Gulf News, Senior Associate Aeeda Ibrahim and Trainee Lawyer Rehab Demardash from Galadari Advocates & Legal Consultants shared their expertise on the pros and cons of taking a loan from your employer in the UAE.

The article, titled “Taking a loan from your employer? Pros and cons you should keep in mind,” delves into the intricacies of loans provided by an employer, which are financial advances some UAE companies may offer to their employees. These loans are typically repaid through salary deductions over an agreed period.

Ibrahim emphasized that providing such loans is not legally mandated in the UAE; it is at the discretion of the employer and often subject to internal company policies. “The employer providing loans to employees is not obligatory by law, and companies are not forced to provide loans to their employees. It is an initiative by companies to help their employees, which is usually subject to the internal regulations of companies,” she stated.

Demardash highlighted the potential benefits of employee loans, noting that they can help workers reduce financial burdens and provide stability at work. “It helps the worker reduce the burdens of financial life and helps him or her have stability at work. There is flexibility in paying instalments in terms of the period that the employer may grant and the worker pays the principal amount of the loan without interest and without incurring large sums,” she said.

The article also discussed the legal framework surrounding employee loans in the UAE, with Demardash citing Article 25 of the UAE Labour Law, which stipulates that the maximum percentage of a salary an employer can deduct as instalments is 20 percent.

Galadari Advocates & Legal Consultants is proud to have its experts contribute to this informative article, providing valuable insights for UAE employees considering taking a loan from their employer. The firm’s commitment to delivering exceptional legal services and expertise is once again demonstrated through this collaboration with Gulf News.

Read the full article here