The payroll advance policy describes our terms for advancing pay to our employees as an emergency short-term loan. This sample policy should be considered a starting point for your company policies
Conditions for requesting a payroll advance
Employees can ask for a pay advance if they:
- Have completed their probation period.
- Have not taken any other company-sponsored loan.
- Have not asked for a pay advance in the past [six months.]
These conditions apply to all eligible employees without discrimination against protected characteristics, rank or position.
Employees should have a legitimate reason to ask for advance pay, usually an unexpected or unavoidable occurrence.
Our company may make payments on behalf of the employee when applicable (e.g. utility, credit card or mortgage bill) instead of giving them the pay advance directly.
Payroll advance terms
The minimum advance pay is [half of employees’ monthly net pay] and can not exceed [80% of employees’ monthly net pay.] If employees find themselves in need of more frequent or larger pay advances than they are allowed, they should discuss the situation with their [Department and HR Director.] Management may decide to make exceptions on a case-by-case basis.
We will deduct the amount of the advance pay from an employee’s future paychecks. This may mean:
- Deducting the full amount from their next paycheck.
- Repaying the amount in small installments out of a number of future paychecks.
The repayment terms must be in writing and signed by employees. Repayment terms will comply with the law if it places restrictions on the deductible amount or if it prohibits paycheck deductions altogether.
We will not charge any administrative fees or interest.
If an employee resigns or is terminated before they repay their payroll advance, HR is responsible for reaching a new agreement with the employee or deducting the entire remaining amount from the final paycheck. Any relevant legal requirements (whether national or local) must be followed.
Payroll advance agreements
Employees who want to request a payroll advance should ask for HR for an official form. They must:
- Indicate their reasons for filing the form.
- State the amount of money they want to receive in advance.
- Sign to accept this policy’s terms.
This procedure must be followed:
- Employees should submit the form to their Department Head (or HR if their Department Head is unavailable.)
- The Department Head should first review the form. If they approve, they must sign the form and submit it to HR and [Finance Director.]
- HR and the [Finance Director] must also review the form and decide whether to grant the employee’s request within [two days] of receiving the form. If they approve, HR must create an agreement form on pay advance and repayment terms taking any applicable taxes into account. This agreement must be signed by HR, the [Finance Director] and the employee and include relevant dates.
- HR must forward the signed agreement to the accounting department. The accounting department must give employees their advance pay through check, cash or bank transfer within [two days] since receiving the form.
If the request is denied, the [manager/HR] must inform that employee within one business day.
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