Like everyone else, an employee can experience financial shortages. This has, especially, be the case at this time of the pandemic. When this happens, the employer can decide to offer a helping hand to the employee to help them get back on their feet.
If you are wondering how to give an employee financial help, you are in the right page. Read this article to know-how.
This is the most common way to help an employee with a financial issue. Employees may request cash advances against an incoming paycheck to sort out their financial problems. It’s usually like a small term loan with no interest rates at all. As an employer, there are several things that you must consider before giving employees some advanced payment;
- They should have a written policy about paycheck advances– The policy usually limits the amount of money an employee can take as an advanced payment. The policy also indicates whether repayment can be done through salary reductions or salary increments.
- Sign a Fine Print– Ensure that the process is done in writing. You should also sign that you have agreed to take an advanced payment and agreed on the terms and conditions of the agreement.
- Understanding minimum wage rules– It’s important to understand the rules. Payroll reductions when paying cash advances back usually do not violate the federal minimum wage rules that have been put into effect.
Grant Loans to Employees
Giving out loans to employees and having them payback after a specific period is not a bad thing at all. However, it is important to keep the following factors in mind;
- Having a written permission note is crucial– The note usually spells the terms and conditions of giving out the loan. It is also important to note that the loans to a minimum wage employee paid by payroll deductions do not reduce a paycheck below minimum wage.
- Watching below-market loan rules, a business owner should charge an interest rate at least equal to the Applicable Federal Rate.