Economics/Business

What is salary advance/advantages/calculation/Who is entitled

The salary advance is the payment of part of the salary to the employee (generally 40% of the value) before the date of common receipt, paid between the 15th and 20th working day of the month.

Bills and miscellaneous contingencies do not wait for payday. When an unexpected situation occurs, people tend to resort to alternative solutions, and a benefit that can help to solve these problems is the salary advance .

Also known as salary advance or salary voucher , this feature allows the employee to receive part of the remuneration before the usual salary payment date . Each company can adopt different strategies for this practice, you just need to follow a few rules .

Both managers and employees need to fully understand how this practice works so that there are no errors during payment . If you have questions about what salary advances are and who is entitled, we will help you.

What is salary advance?

The salary advance is the payment of a percentage of the salary to the employee before the usual date of receipt of remuneration . The advance amount is deducted from the payroll in accordance with the organization’s rules.

Normally, this amount is 40% of the employee’s monthly salary , paid between the 15th and 20th working day of the month . 

However, as there is no specific law for the payment of the advance, it is important to check with the working class union .

Often, collective labor agreements cover some rules in this regard that may be different from those practiced by most companies.

It is noteworthy that the company is responsible for providing the benefit, but employees can also request it . 

When the company offers the advance salary, it must be documented and proven, in order to protect the rights and duties of both the worker and the organization .

Is advance payment mandatory?

In relation to the Consolidation of Labor Laws (CLT), what we have is silence on the subject , since there is no provision that obliges companies to pay the salary advance to their employees.

On the other hand, the norm gives a lot of strength to the collective work documents of the different professional categories.

Therefore, the employer must always consult this document – which can, yes, require payment of the advance within the established limits.

Previously, this issue was not so much in evidence, because the workers received by week, which, in a way, already facilitated the distribution and administration of the money throughout the month. 

Today, as many companies have started to pay for a fortnight or a month, this point has become very considered.

In other cases, the payment is the company’s liberality — which must establish, in detail, certain conditions, such as the percentage and the date on which it will be granted.

As this is a liberality, the employer — at the request of the employee himself — may individually suspend the payment of the advance , giving him/her the totality of each salary installment until the fifth working day of each month.

What are the advantages of a salary advance?

It is indisputable to say that companies need to invest in ideas to engage employees , because this generates better results. 

Now, imagine the person working and thinking about financial problems, bills that need to pay or even lack of credit for the purchase of items in the food basket.

These situations can happen and instability outside the company can have consequences for the work routine, such as presenteeism, absence from work and drop in productivity

The salary advance, therefore, is a way to help the worker when he needs it .

This is an important benefit for the company to act on behalf of its employees. 

In addition, it is a way to prevent the person from ending up opting for credit lines with extremely high interest rates , which, over time, can increase the problem instead of solving it.

The biggest advantages, of course, are seen on the employees’ side , but companies can also benefit from the practice . 

With the salary advance, the company divides the payroll , allowing the cash flow to not be so impacted.

Specialized benefit management systems can also facilitate and organize the process, bringing significant improvements to administrative routines

See, below, the biggest advantages of salary vouchers!

1. Does not compromise the business’s cash flow

In most companies, a large cash flow reserve must be set aside at the beginning of each month so that the payroll is paid in full on the 5th business day . This compromises a great deal of resources.

After all, this capital reserve is especially onerous for small and medium-sized companies , which often make small purchases throughout the month because they do not have the capacity to accumulate much cash. 

With salary advances, your company divides the payroll into two parts (usually considering a 40% advance on the 15th or 20th, and 60% on the 5th business day), alleviating this burden.

It’s important to note that this benefit can be applied directly to payroll , so your business doesn’t have any extra administrative burden. 

The only issue will be to guide the finance department so that the cash flow allows it to make payroll payments twice a month instead of once.

2. Favors the relationship with the employee

Most workers will thank the employer for the advance salary policy . 

Many people find it difficult to plan their finances and look forward to receiving a salary

This access to a share of pay at the end of the month helps people — and entire families — pay last-minute expenses and save money.

3. Improves cash flow

With a lower cost load for the beginning of the month, your business gains more freedom to manage the cash flow . Expenses payable and accounts receivable can be better distributed over the month.

With more cash on hand, your company can negotiate lower prices with your suppliers when making larger volume purchases. In addition, less money is left in cash, without yielding, just to have to pay salaries.

4. Generates encouragement in employees

We all like to be rewarded for our efforts . This is one of the reasons why so many people play video games, for example, which offer prizes and treasures (albeit virtual) for those who overcome challenges. 

5. Values ​​the team

The salary advance is a way to show that the company values ​​the work and effort of its team . 

It is about offering a benefit without greater costs to the business and it is a practice that proves that the administration takes into account the well-being of its workers and acts to reward them accordingly, improving the organizational climate .

Furthermore, by contributing to the workers’ personal finances, the advance helps keep them more satisfied , increasing productivity . 

With the remuneration coming from the company, they have less need or incentive to take out loans in order to pay off debts . This has great productivity benefits.

This way, your team members will have less worry about overdue debt and can reduce absenteeism caused by the need, for example, to go to the bank. Another important consequence of valuing the team is that turnover decreases.

In other wordsprofessionals spend more time in the company , increasing the retention rates of productive talents that add value to the business. 

This employee, even being surveyed by other companies, will tend to prefer to stay in the current job, even if the proposals received, for example, have a higher salary

The organizational culture and other aspects not related to remuneration are fairly considered by the workers.

6. Promotes participation in the team’s financial life

Paying the salary is just an obligation. The advance is a policy that shows the company’s involvement with the financial life of its employees .

In addition, creating an advance policy is an opportunity for the company to offer courses and workshops on financial education , advising workers on credit, debt, investment, pensions, planning, and so on.

What is the maximum amount of salary advance?

In general, the maximum advance is 40% of the full salary owed to the worker for the month. 

For example, if you have a salary of $1000 and you receive an advance of $400, the following month, on the day of salary payment, you will only receive $600.

How to calculate the salary advance?

The salary advance calculation is very simple . Using the previous example, suppose a worker’s salary is $1,000 and he has worked a full month. Look:

1,000 (salary) x 40% (maximum percentage of advance) / 30 (days of the month) x 30 (days worked) =
R$400.00 (advance amount).

When the employee does not work the full month, either because he was hired or returned from vacation during the month, use the same formula to find the proportional advance amount.

To do this, simply replace the number of days worked in the month with the actual number practiced by the employee.

Who is entitled to a salary advance?

If the salary advance is part of the company’s policy, it is the company’s duty to offer it to all its employees . 

The benefit cannot be restricted to just one person or a sector , as a privilege. The entire team has the right to use it, unless the category union has any restrictions on it. 

In case of dismissal for cause , payment may also be denied.

How many days do you have to work to qualify for the advance?

The employee must have worked for at least 15 days , that is, half of the month, to be entitled to the salary advance.

In addition, it is important to emphasize that the respective amount must be itemized on the payroll . 

The advance is usually paid on the 15th or 20th of the month , but may vary from company to company.

What can be deducted from the salary advance?

Normally, there are no discounts on the advance , as the calculation of taxes, vacations , social security contributions and other charges is based on the full amount of the salary . 

Salary advance models

There are four most common ways for the company to provide the advance salary. They are: voucher, health insurance tool, advance payment policy and salary on demand . 

Find out more about each of these ways in the following topics, don’t miss out!

1. Valley

The most popular way to offer salary advances is the salary voucher, which is granted upon the employee’s request . 

Payment is made by bank deposit or in cash , depending on the company’s preferences.

This is an advantageous method for workers, who receive immediately . However, it requires a lot of care from the financial management , which will have to make payments differently for each professional. 

Those who received wage vouchers will later receive less than others.

Vouchers are usually 40% of the salary or less , as long as it is agreed with the worker, and payment is made in cash or deposit between the 15th and 20th, as stated. 

For this reason, it is not the safest and most practical way, as it makes it difficult to control and organize finances , and may increase the risk of fraud.

2. Agreement or multi-benefit card

The agreement tool, also known as a multi-benefit card, is based on offering salary advances through a card . 

With it, employees can pay expenses that are really necessary, such as household purchases and medication, depending on the specific agreement.

This practice allows the organization a certain guarantee that the basic needs of its employees are met . Employees are offered greater control over their own expenses. 

In addition, many establishments offer discounts for associated cards , making them worth even more than money.

3. Advance Policy

Establishing an advance policy is a great strategy to offer it securely . 

For this, many companies adopt the biweekly payment policy , that is, the payment of the salary twice a month. This gives employees better cash flow .

However, this practice doubles the work of the financial management of companies , which will have to carry out the payment process twice a month, as said.

4. Salary on demand

Nowadays, people have to pay a large amount of bills every month , and the payments do not always coincide with the date the salary is received. 

This is one of the main reasons that led companies to adopt salary on demand as an advance payment method.

The worker starts to be remunerated in proportion to the days worked , thus avoiding that the payment of slips and other expenses is delayed. 

To avoid problems, however, it is important to pay attention to certain issues, such as vacations and other labor obligations, when paying the salary on demand. The main benefits are:

  • reduction of financial stress on the part of professionals;
  • increased productivity of workers;
  • better control over finances;
  • greater attraction of talent ;
  • increased employee engagement.

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