Thando is an employee at company X and he is threatening to file a complaint with the Labour Office if he doesn’t get a salary advance. He says that his child was in the hospital and it is his right to get a hold of his salary to pay for the medical expenses. He adds that he doesn’t understand why his employer is making things hard for him considering that he has a right to the fruits of his labor.
Some employers may be encountering the same issues with an employee. Let’s tackle what the law says about this to enable them to deal with the issue better.
Firstly, there is nothing in the employment law which requires an employer to release salary advances. Employees only have a right to the pay on the work they already put in. This does not apply for future work which is the basis for salary advances. In effect, the employee is saying, “I will continue working for you in the future, I just want to get the future pay for that future work in advance.”
Secondly, the reason why the employee is asking for a cash advance is immaterial. It doesn’t change the fact that it is not a right under the employment law. It could be for emergencies, for tuition, for vacation, for house repairs… could be anything. But none of these automatically grant an employee a benefit to get money ahead of their salary date. In short, it doesn’t matter what the reason is, employees can’t demand salary advances from their employer as a matter of right. They only have rights to the benefits and pay enumerated in the employment law or already granted by the company policies in place.
- Advertisement -
Thirdly, despite the fact that this is not required by law, the employer still has the option to make it available based on their discretion. In short, if an employer feels that they want to give it, they can under the principle of management prerogative. If ever the employer decides to provide this, my strong advice is to set limits.
- Advertisement -
The first limit an employer should set is how much money are you willing to release as salary advance? An employer has to balance the need of the employee with the needs of the company. Just because the employee needs 3 months’ worth of salaries in advance doesn’t mean the employer has to comply. This is because of the risk of non-payment. Employers must be aware that there have been cases where the employee goes on AWOL after getting salary advances. So the employer must be prepared to lose this advance if the worst case scenario. The employer should not release excessive funds which may adversely affect the company’s cash flow irrevocably.
Next is for the employer to be clear on what circumstances they will consider giving a salary advance. What circumstances do I mean? (i) is this available upon request?; (ii) how frequently?; (iii) Can they do this on a monthly basis? Daily? Yearly?; (iv) is there a limit to the amount? (v) how soon are they supposed to pay it back? (vi) are there special circumstances before they become eligible (medical emergency, tuition, tombstone unveiling, etc)
Since the law gave the employer the discretion to determine these factors, the employer may want to choose what makes sense to them and their employee’s situation. The point is that employers should have a clear picture when this benefit may be availed of. The worst thing is to make it wholly discretionary without any guidelines. Employers will be accused of favoritism if they grant this to certain employees and withhold it from others without any guiding principles.
It is important to document the request. There are cases where the employee deny requesting the amount. That way, this amount may be differentiated from allowances, bonuses and salaries.
- Advertisement -
It is great requirement to have an acknowledgement receipt to document the receipt of the money. There are some cases where employees deny the receipt of the money. This is especially tricky when it comes to salary advances.
Every grant of a salary advance should have a payment plan integrated. This is where most employers make a mistake. The acknowledgement receipt should also contain when payments are due, how much, and how frequently. It should also spell out what happens to the salary advance if the employee leaves or resigns.
With the payment plan, employers should also integrate an authorization to deduct. In simple terms, this means that the employee agrees to deduct the payments from his/her future salary and benefits. This saves the employer from concerns about illegal deductions down the line.
