Cash Advances &/or Employee Loans
KHelgeson
14 Posts
Please provide feedback regarding whether or not it is a general practice to allow employee loans &/or cash advances. I find myself in a dispute with a colleague who tells me that 90% of companies offer this to their employees - I would argue to the contrary that only 10% might offer this as a benefit.
As the Corp Director of HR I want to limit expenses and frown on this type of benefit for my current employer.
Thank you in advance for your feedback.
As the Corp Director of HR I want to limit expenses and frown on this type of benefit for my current employer.
Thank you in advance for your feedback.
Comments
If all else fails, we try to refer the employee to a local bank for the necessary cash advance.
If you don't limit it to hard-luck cases, you would encourage a few irresponsible employees to spend even more foolishly. And big money troubles can spill over into work. (I'm a big fan of the book Financial Peace by Dave Ramsey, who advocates living within your means. Not that I follow his teachings strictly. But I digress.)
State law might restrict paycheck deductions. And maybe the FLSA, too, if the deductions take the employee below minimum wage. And, sooner or later, you'll have an employee who can't/won't pay back the loan or advance. Maybe he quits before paying it back.
I wonder if you could achieve most of the same goals with other assistance like disability insurance, EAP, referral to government agencies, etc.
James Sokolowski
Senior Editor
M. Lee Smith Publishers
Just offering loans to employees is a bit unusual in my experience. I also know of some small business owners who have gotten burned doing it (loan never repaid, and employee quits. I do not think it is the norm at all.
Good Luck!
After I was here a short time, I put a stop to this. The problem was that the same people every payday would need an advance as we had deducted their previous advance from that paycheck.
I told the President that it was taking up to much of my time, costing the company money, and that we really weren't in the banking business.
I said that I would put out a memo informing all employees that by the end of the following month all payday advances would be stopped and all outstanding balances would be deducted from their checks.
I found as I went through the records (what little they had) that some people owed money from previous advances that had never been deducted. So of course I made up a schedule of payday advances and paybacks so that I could show the employee where they stood, because they KNEW they had paid them back and I was wrong.
Of course, I was not a popular person at this point, but it actually worked out for the best. It made the people who every payday were in getting advances learn to budget their pay checks better or find another way to get cash. We have since grown and have 3 other locations, so I am very thankful that I was allowed to nip the advances when I did.