What is an employee advance?
An employee advance is when an employee receives their salary before the agreed-upon payday and it is deducted from their next month’s pay. Essentially, it is a short-term loan given by the company to the employee.
According to Section 22 of the Labour Law, employers are not allowed to advance more than one month’s salary to employees unless under specific circumstances and with approval from the Ministry of Labour.
Special circumstances
In the following situations, employers can advance more than one month’s salary:
- To enable the employee to purchase/build/renovate a house.
- To enable the employee to purchase land.
- To enable the employee to purchase livestock.
- To enable the employee to purchase a car, motorcycle, or bicycle.
- To enable the employee to purchase shares in the employer’s company.
Employers must apply to the Ministry of Labour and obtain approval before implementing such advances.