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Quiz Corner: Employee Advances

questionIs it okay to offer employees loans?

By Kristen Kelly, Payroll Team Lead

Q:   An employee shared with his employer that his family is going through a hard financial situation. He indicated it was difficult to make ends meet. Is it OK to offer the employee a loan through an employee advance and have him pay back the company over the next two years?

A:   It is permissible by law to offer wage advances to employees through payroll.  However, ESC recommends discussing this with your HR Consultant prior to making any agreements. Federal and State law requires certain regulations a company must follow. Having a written agreement in place is important. Also, from an HR best practice  standpoint, a business owner should be aware of setting precedence with this type of agreement.  Finally, the employer must consider what potential consequences could arise.  For example,  if the employee takes a leave of absence, leaves the company, or is otherwise unable or unwilling to repay the advance.