It is generally not recommended that employers get into the lending business. However, some employers have big hearts and provide cash advances to employees in difficult financial situations.
If the employer offers a cash advance for this reason, it should outline the terms of the advance, including repayment schedule and how an unpaid balance will be handled upon termination, and have the employee sign the document.
Interest and fees are usually not included in these cash advances, though they can be.
The easiest way for the employer to recoup the money advanced is through payroll deduction. Repayment should be made in as few installments as financially feasible for the employee, as outlined in the signed agreement.
The employer must ensure that it adheres to state and federal wage and garnishment laws in the process. Under federal law, the deduction of the principal portion is permitted to take wages below minimum wage or overtime requirements.
The administrative cost or interest portion may not.
Some employers provide cash advance loans to employees to cover travel-related expenses. In this case, the employee should be required to provide an expense report substantiated by receipts or other documentation.
If more money was advanced than incurred during travel, the employer may require that this repayment be made through payroll deduction or via personal check.
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