A radical take on the employee loan: How it can attract, retain top talent

by Jared Bilski

To stand out from the competition and attract and retain top talent for the long-term, some employers rely on some very creative compensation tactics.

One of those tactics is a forgivable loan. Under this type of arrangement, employers offer an employee a loan that will be forgiven if that worker is able to meet certain terms. Generally, at least one of those terms is that the employee stays at the company for a certain length of time. But employers can also work performance standards into the terms of the loan as well.

Here’s an example of how this type of structure works, courtesy of The Emplawyerologist: Say an employer offers one employee a $50,000 forgivable loan because it wants to retain that worker for at least five years.


Under the terms, every year that employee stays with the company $10,000 of the loan is forgiven until the five years are up and the loan is completely forgiven. So if the employee leaves after one year, she is only on the hook for $40,000 of the $50K loan (plus interest). The $50,000 is offered up front as a tax-deferred lump sum and the employee can use it in any way she sees fit.

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