Why you shouldn't give employees payroll advances

First of all, you're not their parent or their bank. I see this happening most often in businesses with a young staff. You do want to help them out, they made a good plea, but then all too often they up and quit before the cash advance is repaid through payroll deductions.

Saving is a good habit to develop early, but all too often people's finances are stretched to the limits with nothing left to save for those "rainy days". It's not enough to live within your means, but you need to live BELOW your means in order to have enough money left to save.

Encourage your employees to step back and look at their spending habits before you so generously advance them pay when something happens that they are not prepared for. It's never a matter of "if" something will happen, just "when". How much are they spending on cable TV, cell phones, dining out, specialty coffee? Again, you are their employer, not their parent but you can bring up this topic when they come to you for an advance.

There are more and more of these "Payroll Advance" type businesses today, mainly because they are making a ton of cash in interest on payroll loans. These make me sad... they are basically just keeping poor people poor.

I'm a big fan of Direct Deposit for payroll. Especially when we encourage employees to split a percentage of their paycheck into their savings. There are fees involved with any automated banking transaction, but I'd guess that in the long run, these fees are less than employees leaving without repaying advances. And, you'll be helping to create another generation of savers, and when something does happen, they will be prepared.