Employee Advances - When is it too much?
Our company gives Employee Advances out when some one is in need - we actually do it quite a bit & mostly in the winter months when hours are cut and employees are laid off until the following spring. We handle the re-payments with payroll deductions and sometimes an extra cash payment here and there (not too often). We do not have a policy about Employee Advances, but have guidelines we follow and a form that must be completed by HR & signed by the employee and one of the General Managers. The form is not my concern.....
We have an employee who took a $5,000.00 Advance at the end of March this year & currently has a $2,000.00 balance remaining on that loan. It is projected to be paid back in full after his last paycheck this year (12/26/08) pending he does not miss a paycheck for any reason. Yesterday our General Manager called me to have another Advance check cut for this same employee in the amount of $4,000.00 to be paid back in $100.00 incriments and then bumped up to $350.00 per paycheck payments after the end of this year. My manager is very concerned about this due to the fact that the employee has had a conversation with her previously about his financial problems, he & his wife just had their 3rd child, he has a very large mortgage payment per month, lots of bills, etc. Knowing this bit of personal information & being the "concerned mom-type" (in her words) she wants to know if there is any way for her to approach this employee to see if she can discuss this with him - maybe from both an employer and a personal stand point. She is very worried about him and doesn't want him & his family to sink any further into trouble & for the company to be adding to this. I know she wants to see if he can get some financial counseling and maybe look into something the company can help him with - like finding a free service he can utilize. Would this be unethical? How can she go about it?? Should she at all? And can the company ask him WHAT the loan is for? We never have asked for details before so can we start requiring a reason for advances? I don't feel it's a good idea since making a decision based on an employees reason doesn't seem very fair - who's to say one employee's financial reason isn't good enough to warrant a loan and another's is??
She is also concerned since the company WAS/IS trying to phase out Employee Advances all together. Also another question (I just thought of....) - the managers are tossing around the idea of keeping the Advances, but charging interest on the repayment. Is that even legal? Can the company charge a fee and/or interest on a loan/advance???? Any help in this matter is very, very much appreciated!
~ Mouse in Illinois ~