This document details both the HR and financial implications to make loan decisions easier for everyone. There are a number of HR and financial considerations that departments, managers and employees need to take into account that apply in different circumstances.
Staff loans between ministries are an essential part of government operations. They provide a good opportunity for employees to acquire skills and support high priority business outcomes and therefore have benefits for individuals and for Her Majesty’s Government.
General principle of finance
Departments, managers and employees should consider the financial implications of loans to other departments before going ahead with an employee loan. Departments should avoid re-invoicing salary costs as this attracts 20 percent VAT and recharging has a significant administrative burden for all relevant departments.
General HR Principles
A loan should only be made for a period of up to two years, unless there is an exceptional business justification accepted by departmental management teams.
Loan options should only be considered for employees who:
- were recruited in accordance with Public Service Commission Recruitment Principles (appointment on merit by open and fair competition).
- have successfully completed their trial period.
- demonstrated acceptable levels of performance and attendance.
- have no immigration visa restrictions that specify a particular place of work.
Loans should always have a written agreement which is accepted by all parties before the start of the loan. Any modification of the loan such as a promotion or an extension requires the establishment of a new agreement.
Loans within six months
Employees will remain on their home department’s payroll and associated costs incurred are not to be reimbursed by the host on account. This avoids any negative impact on the employee, such as tax implications or salary interruptions. It also reduces the administrative burden of creating and paying many government-wide invoices that attract VAT at the rate of 20%.
For loans of less than six months, employees:
- remain on the payroll of the home department for the duration of the loan,
- be covered by the salary premium of the home ministry
- be entitled to annual awards from the home department
- be managed in accordance with the household performance management framework
- be counted in the workforce of the home department
- will be subject to the terms and conditions and other policies of the home department during the loan period
- be entitled to expenses in accordance with the policies of the home departments, with some exceptions, the host department undertakes to reimburse the employee directly for the expenses incurred
Employees may not necessarily continue to be entitled to the non-contractual or role-based allowances they receive in the home department when transferred to a new department on loan.
Any temporary promotion of less than six months should be agreed with the home department before being offered to the employee to ensure that the home department can cover the costs in their payroll. When an individual is loaned for a temporary promotion, the home department’s compensation and reward policies will apply.
Any overtime must be agreed with the home department before being offered to the employee to ensure that the home department can cover the costs in their payroll.
When a loan is extended beyond six months, under normal circumstances, the employee should be transferred to Home Pay, on time and from the first of the month, and for the remainder of the loan period. .
When the home department’s finance team decides that the costs are significant and the home and host departments mutually agree, the costs may be billed. This will have to be proven in writing by both departments. If billing takes place, there should be one bill for the life of the loan to avoid undue administrative effort.
Six month loans
Departments should follow the process outlined in the
Tips for public servants on how to move jobs between departments and agencies. Going through the CS employee transfer process completely eliminates any need to reload salary costs.
The payroll must be transferred to the new service to be effective from the first day of the loan. This should be set to the 1st of the month, with enough time for the HR / Payroll teams in the Export and Import departments to process the employee transfer. This will avoid the risk of payment errors and the tax implications for the individual. No top-ups can be made for partial months or processing delays.
For loans over six months, employees:
- switch to the payroll of the reception service for the duration of the loan
- be covered by the host’s remuneration
- be entitled to the rewards of the host department during the year
- be managed in accordance with the host performance management framework
- be included in the staff of the reception service
- will be subject to the terms and conditions and other policies of the host department during the loan period
- be entitled to expenses in accordance with the policies of the host departments
Employees may not necessarily continue to be entitled to the non-contractual or role-based allowances they receive in the home department when transferred to a new department on loan. When an individual is loaned out for a temporary promotion, the compensation and reward policies of the host department will apply.
If an employee accepts an offer of a permanent position with the host department, the loan agreement is terminated and the employee is transferred permanently.
Upon their return, employees will be matched with the equivalent salary scale of the home department and, if applicable, the salary award.
When the loan is extended, this must be agreed with the originating ministry and a revised loan agreement must be put in place. Even if this extension is less than 6 months, the employee would remain on the payroll of the reception services and the above conditions would continue to apply.
Six-month emergency loan deployments
The normal rules for loans over six months will apply with the following exceptions:
- when it is not possible to set the transfer date for the first of the month, for example, an exceptionally urgent and critical business need, including at ministerial request or an emergency. Departments must mutually agree on these arrangements, as the exporting home department will need to cover the payroll for the pay period (s) until the transfer can be processed.
- when loans are longer than six months, departments are not allowed to reload partial and / or full pay periods while the employee transfer is being processed
- if a department is materially affected by a high volume of loans for which it has covered the payment by not respecting the CS employee transfer process, departments should take this into account in their own departmental budget and as part of the budget process with HMT colleagues. Finance teams within departments can advise on specific process and timeframes for consideration within your department in accordance with HMT’s Consolidated Budgeting Guidelines
Emergency loan deployments within six months
When a critical role needs to be filled quickly to meet a priority or urgent need for resources, normal rules for loans of less than six months will apply, with the following exceptions:
- a signed written agreement may not be in place until the employee takes up the job. This should be done retrospectively, within two weeks of the employee taking up duty.
- the expenses incurred by the employee during his loan must be submitted by the employee to his head of establishment for authorization. Where expenses are expected to be over £ 200, the employee will need to seek advance approval from the house managers and host.
- temporary promotion does not apply to employees with priority deployments and emergency six-month loans
These appointments relate only to the transfer of level.
At the end of a loan, the reception manager and the home manager must take all practical steps to facilitate an effective return. Employees will revert to the terms and conditions, including compensation and retirement terms, of the home department.
The home or host department may terminate the loan earlier than the agreed end date by giving the agreed notice period. Loans may have to end sooner if the employee accepts a new permanent job, if the employee has been promoted, for emergency or change reasons, or if the loan is not functioning properly and the discussion does not occur. did not solve the problem.