Payroll advance
Workforce Management Glossary
Payroll advance
What is a payroll advance?
A payroll advance is essentially a short term loan granted by the employer to the employee. While the terms of this arrangement will differ from organisation to organisation typically the employee will be granted early access to their wage and will repay that loan with future wages earned.
What are some of the considerations around a payroll advance?
While there are benefits to helping employees by issuing payroll advances there are some factors that businesses need to consider. For example there is a financial risk at play if the employee is unable to make up for the advance pay by not performing at work in the meantime. Additionally payroll advances can also prove to be a cash flow strain.
On the other hand it’s important to consider the advantages of actioning payroll advances. If employees feel taken care of by their employer they are statistically more likely to showcase increased productivity and higher morale as well as being less likely to take sick leave.
How can a business manage payroll advances?
One of the keys to managing payroll advances is to have a clearly communicated and universally understood policy. This policy will outline the terms of the advance such as the repayment value and any interest that may be accrued.
Once the policy is in place businesses can make the application process easy by providing access to Roubler’s online document library which facilitates electronic signatures. From there the relevant information can be easily accessed by the payroll department so they can action the advance at the appropriate rate and time.