What To Do If An Employee Asks For An Advance On Their Paycheck

What To Do If An Employee Asks For An Advance On Their Paycheck

There probably isn’t a supervisor out there who hasn’t been approached by an employee who wants an advance on their paycheck. While some employers have no problems with this and actually have an established policy for giving advances, others may not be comfortable with this practice and may not even know how to approach the issue. Are there any legalities involved and does a supervisor have to give an advance or can they be denied?


No One Says You Must Advance Money

There is actually no legal ruling in regard to whether or not you must advance money to an employee who asks, but there are rulings in place for how you should proceed if you decide to advance the money. For example, if you decide to allow employees to borrow against their paycheck, then it can’t be considered a loan if you think you’re going to profit from it. Whereas there are payday advance centers that charge high interest rates in order to realize a profit, supervisors aren’t allowed to benefit from the loan. This is a very important bit of legislation in regard to running payroll, so always keep this in mind.

What To Do If You Decide Against Payday Advances

In the event that you simply aren’t comfortable with lending against an employee’s paycheck, a simple no really should suffice. You are the supervisor and there is no reason you should have to explain your refusal. But if you do, make sure that nothing discriminatory could be used against you at a later date. It must be understood that an across the board policy denying payday advances is in effect. If you sense that this employee is simply having a really difficult time and in an unexpected state of desperation, you could refer him/her to a site like themoneyhub.co.uk that offers personal and home equity loans, even to those with poor credit.

What To Do If You Choose To Advance Money

If you opt to advance all or part of a paycheck to the employee who asks, the terms of the advance should be in effect and published prior to the loan. Many employers have a written policy in regard to payroll advances and before lending against that person’s check, the policy should be read and signed as acknowledgement that the terms are understood and agreed.

One final piece of advice comes from employers and their legal representatives that it is better to know too little than too much when being approached for a loan. Getting back to the idea of discrimination, it is just possible that an employee refused an advance could always claim they were discriminated against because of what was discussed when the advance was requested. Don’t leave yourself open to a situation like this. With a written policy and keeping information to a ‘need to know’ basis, you can be fair with all employees, and protect your company from legal issues down the road. And, there will be minimal stress involved because it’s all written in the company policy manual.