Three Things to Consider Before Offering Payroll Advances
February 4, 2021
What do you do when employees come to you asking for a payroll advance or a loan? You want to make sure your employees feel supported, especially when they are coming to you for help during a financial emergency. An advance on their paycheck can feel like a simple way to help out. But before you offer them a payroll advance or loan, it’s important to consider both the costs and risks that come with them.
Do you have the bandwidth to create and administer a payroll advance or loan program?
Setting eligibility criteria, establishing loan terms, adhering to legal requirements, and managing tax implications are just some of the administrative tasks you face when first implementing a payroll advance or loan program. Once created, you will need to devote staff time to recording and processing all advances and loans.
Are you able to assume the cost of a loan if an employee can’t pay?
With any loan, there’s an inherent risk that the loan may not be repaid. Even if an employee is repaying through payroll deductions, it can be difficult to collect payment if the employee’s work schedule is reduced or they find employment elsewhere. Your business must be financially prepared to assume the costs associated with any defaulted loans.
Can you offer payroll advances and loans objectively and equally?
Offering one-off loans or advances to just a few employees may not seem problematic. However, this could be viewed as discrimination or favoritism if you can’t create objective eligibility requirements and equal access to these programs.
But the value for your employees is big.
It’s proven that providing short-term loans to employees can make a big difference in their financial stability. That’s why WorkLife Partnership launched our Small Dollar Loan Program last year as a cost-effective, low-risk alternative to payroll advances and employee loan programs.
When partnering with WorkLife, we take on the administrative burden so you and your staff don’t get sidelined with administrative tasks. Because WorkLife is the lender, your company is not financially responsible if an employee defaults on their loan. And our simple eligibility requirements ensure all employees have equal access.
We don’t require any collateral or credit check, so our loans are accessible to people who are often left outside traditional credit options.
54% of borrowers in our program would have taken out a high-interest payday loan without WorkLife.
94% of borrowers feel they’re in a better place financially.
98% say having this loan program available makes them more likely to stay at their current employer.
If you’re considering offering the WorkLife Loan Program to your employees, schedule a conversation with us.