What is the payroll advance and how does it work?

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The salary advance or the payroll advance is an employee's right. que se recoge en el Estatuto de los Empleados, en el post 29, donde se menciona que “el trabajador y, con su autorización, sus representantes legales, tendrán derecho a recibir, sin la llegada del día señalado para el pago, anticipo pagos a cuenta del trabajo ya realizado ”.

This option that exists for employees also considers collective agreements as part of their statutes to be executed; The first thing to consider is that this option does not imply that a worker has the right to request that he be paid for the next six months of work, but that this option only considers the request for the amount corresponding to the last period worked and that has not yet been charged. At the same time, you have to pay attention that cannot exceed the identical to 90% of the earned salary until the moment the request is made.

To better understand this we will put an example in which an employee who has a monthly salary of about 1000 euros, makes the request for a payroll advance On the tenth day of the month, as previously said, the employee has the right to request a maximum of 90% of the amount that corresponds to him until that day, for this case, it is equivalent to about 299 euros.

East advance on account, by law it is always deducted from the respective payroll the following month to which it has been made effective; At the same time, this payroll advance cannot be requested periodically, since this situation represents an exception to the general regime in terms of salary settlement time, which is legally supported. This is because this situation supposes a readjustment of the company's treasury.

However, the previously explained is the strictest case that can be found, since in practice the The collective agreements that regulate advances in each company or in each sector are more flexible. Of this dynamic there are some companies that make it possible other types of advancesOne case is about wages not yet received and for future jobs not yet performed, in these cases the regulation usually says: "in which not only the date of payment of the salary is advanced but the same accrual of the right."

The regulations that provide these agreements are generally the cases of application, regularly linked to Extraordinary expenses or urgent and justified needs by the applicant, In addition, some aspects of the history usually intervene, such as the years of service to the company or the position that the applicant occupies.

The regulations that exist due to the agreements generated between the company and the worker are also important factors since legally there is nothing to prevent asking for a larger amount as an advance and agree how to deduct or return it; however, this may seem more like a loan than an advance.

Loans to employees

Some other conventions contemplate employee loans. Some other agreements do not contemplate them and their approval depends more on company policy and will be negotiated on an individual basis.

These loans are in fact very similar to a common credit and its main difference with the payroll advance is that on these occasions the money that is delivered to the worker must be returned, with or without interest. It is in these cases when the company acts as a financial entity, which with the purpose of ensuring money back puts conditions such as the term for the return, the amount to be paid, among others

The company is also the one that determines that the employee meets all the requirements, subsequently the employee must fill out a form that will generally be delivered by the human resources department and thus be able to make the formal request. Later, both the company and the worker sign the loan agreement.

The accounting management of these loans is a bit more complex, because the companies are not a 100% financial entity. In most cases the company sets a lower interest than that commonly found in the market; For this reason, the financial institution considers that the difference is considered performance for the worker. Therefore, this difference must be declared in the respective tax return.

Considerations for requesting a payroll advance

Most likely, at some point you have considered request a payroll advance to meet an expense that went beyond what was planned or anticipated. And this is normal today because if we take into account the tightness of the economy of each person caused by the crisis, many employees decide to make the decision to request an advance or advance of their salary from the company. In a way, it can be said that it is a loan made by the company in which the payment guarantee is the same work of the employee. And even though it is a good way to overcome a financial situation, you should always pay attention agreements between workers and companies, at the same time of the regulations by the current labor law.

A way that exists to be able to get a Payroll advance without this entailing the inconveniences that both legislation as a payroll advance require, is the Cash advance. This format can be considered as if it were a loan granted as if it were a salary advance, since the loan is made in such a way that both the payment date and the date of entry of the payroll to the worker coincide. This helps eliminate the limitations that exist when requesting a payroll advance. In a certain way, it can be said that the company grants the worker a microcredit, named for the amount of money that is requested and the term in which it must be paid; However, despite being strictly a loan to face some financial anguish or some extra expense that was not foreseen by the employee, it can be treated as a payroll advance due to the aforementioned conditions, that is, the date of return and payroll matching.

The purpose for which these microcredits are designed is to be able to respond to the economic need of some person who needs financing limited in time, concrete and subject to a relatively very short payment term. It is a loan designed to meet the needs of a worker who needs money to pay for extraordinary and urgent natural expenses. Although the payroll advance can be established as a cheap form of financing, it does not apply due to the nature of the employee's financial needs; This loan, even if not directly, is still a salary advance that is made to the company (that is why it can be called a payroll advance), but with regulations and characteristics quite different from those that govern the advance. . . payroll, while having specific characteristics.

Advance or loan

Once we differentiate the salary advance from the accounting advance, we will proceed to mention the advantages and disadvantages so that you can select the best option between the two. The advantages that Cash advance Those present on a salary advance requested from the company are: the speed of response or immediacy, the privacy and independence that this type of advance presents are also advantages. Well, in constant progress, it is not necessary to give or give explanations to the bosses, because during the procedure everything is requested and authorized in a discreet way. Once the credit is authorized, the respective money is deposited in the account of any bank that the employee prefers immediately, this being an advantage for the bureaucracy that has the procedure of requesting a payroll advance in a company. This unique advance is a loan that can be amortized or repaid in advance, even reducing expenses to the amount accrued up to today of payment. Finally, the accounting payroll advance is a discreet, fast and efficient way to have a salary advance without giving explanations to the company and with a much faster response.

Now, even though this time of The advance has several advantages and it also has disadvantages., but these are not in terms of the procedure as in the case of the advantages but on the part of the workers because it should not be forgotten that although they are loans they must continue to be taken as payroll advances, so the money must be returned strictly paying it with the next payroll that is collected, because if this is not done, the costs involved in this loan will increase rapidly.

As a last point we will say that despite the fact that this advance option exists in companies, it can only be used as an emergency resource, and this option should be used excessively, because if what is needed is structural financing, it can be And you should go to a cheaper source of financing, in order to save as much money as possible during the procedure.