Employee Loan Deduction Authorization Form

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Document Overview

A Loan Deduction Authorization Form is a formal HR document through which an employee gives written consent to their employer to deduct a specific amount of money from their wages or salary each pay period to repay a loan or salary advance.

Purpose of the Loan Deduction Authorization Form:

1. Ensures the employer follows Sections 17–19 of the Employment Act, 2007, which prohibit any wage deductions without the employee’s written consent.
2. Provides written proof that the employee voluntarily agreed to the deduction, preventing claims of unlawful or unauthorized salary reductions.
3. Documents the loan details — total amount, repayment schedule, interest (if any), and start/end dates — ensuring clarity for both parties.
4. Helps HR and payroll officers correctly record deductions on payslips and track repayments until the loan is cleared.
5. Protects both the employee and employer in the event of any misunderstanding or dispute regarding outstanding balances or repayment terms.
6. Reinforces the legal cap that total deductions (including loans) must not exceed two-thirds (⅔) of an employee’s gross wages, ensuring fair treatment.
7. Serves as documentary evidence during audits or labour inspections that the employer obtained lawful consent for all deductions.

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Employee Loan Deduction Authorization Form

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