If you are an employer with workers in your charge, it is very likely that at some point an employee has asked you for an advance on their payroll with the intention of being able to face an unforeseen expense, and you have had doubts about how to act on it.
Are you required to face that payroll advance to your employees? Could you refuse? Today at AYCE Laborytax we tell you everything you need to know.
What does the Workers’ Statute say?
Article 29 of the Workers’ Statute establishes that every worker has the right to request a payroll advancebefore the day of collection, provided that it is requested on the work already done.
The request for payroll advance is something extraordinary, which in no case could become habitual on the part of the worker
It also indicates that the request for an advance cannot become commonplace,as otherwise the usual scheme governing the company’s payment of salaries could be broken.
That said, the payroll advance would consist of a percentage of the payroll already worked,and not collected. But what does this mean? Putting us in the situation that a worker requests an advance on the 15th of the month, only half of the monthly payroll would correspond, to which the proportional part of the extra payments could be deducted.
With the intention of resolving these situations, collective agreements usually set this type of advance,defining with greater clarity both the limits of the advance, as well as the reasons that could lead a worker to request it.
In any case, if the worker were to be granted such an advance, it would have to be deducted from the payroll for the month worked. Otherwise, we would be talking about a loan from the company, and not an advance.
How should the payroll advance be requested?
Although the Workers’ Statute does not establish how a payroll advance should be requested, AYCE Laborytax’s labor advisors
recommend always doing so in writing, regardless of whether the request is made by the worker himself, or his legal representative.
The time limit for the company’s response should not be exceeded in time.
The Workers’ Statute also does not indicate what the deadline is for the company to offer a response in this regard,but both for the good reputation of the company itself and for the situation of the worker, it should not be extended in time.
Payroll advance, an exceptional right for workers
As we have already mentioned, a worker has full right to request a payroll advance in case of what he needs, but it would always be an exceptional right, and never something that he could usually request.
Cash advance, an alternative to payroll advance
In the event that the company was going through a difficult time economically speaking, and could not meet the advance requested, the worker could benefit from the advance.
The advance payment consists of a loan that is conceived in the same way as a salary advance,since the date for its repayment coincides with the date of entry of the payroll, but that is free of the limitations that the advances requested from the company may initially have.
A cash advance works in a similar way to a payroll advance, with several features that differentiate it, and even improve it.
The current advance is closer to a micro-loan,by means of which an extraordinary economic need is met, the repayment date of which must coincide with the date of recovery fixed by the undertaking. This is a very common solution among banks, which is subject to a short and very specific repayment period.
The main advantage offered by the advance payment over the payroll advance is immediacy, privacy and independence.
On the other hand, there is also the possibility for the worker to apply for a company loan,although it must be said that, as stated in the Workers’ Statute, the employer would in no case be obliged to grant it. Even so, there are collective agreements that do recognize this right to employees in certain situations.
In those situations in which a worker has the confidence of the employer, he could agree to such loans privately, negotiating everything related to the amount borrowed, the repayment terms, possible interest, etc.
In case due to an economic unforeseen event, you are evaluating the possibility of request a payroll advance from your company, you should know that you are fully entitled to do so. But remember that the company would only be obliged to attend to it, as long as the advance was made on the work already done.
If you have any questions, contact our professional advisors,and we will offer you all the help and information you need.