In an effort to manage the effects of the COVID-19 lockdown on the economy, the Reserve Bank has announced a further historic cut to the repurchase rate (repo rate). The repo rate will be cut by 50 basis points, from 4.25% to 3.75%, effective 22 May 2020.
The change in repo rate impacts the “official rate” used to calculate the fringe benefit on employer loans. The official rate is set at an interest rate of 100 basis points above the repo rate and any changes in the repo rate will only affect the official rate from the beginning of the next month. The official interest rate for employer loans will therefore change from 5.25% to 4.75% effective 1 June.
As always, you do not need to take any action to implement the new interest rate. We have already updated the system to reflect these changes. All employer loans on payslips dated from 1 June 2020 will make use of the new interest rate. As our system is built to be intuitive, any payslips dated before 1 June 2020 will make use of the previous interest rate.
You can find more information on employer loans on our help page here.
If you have any questions, please do not hesitate to contact our support team.