At some point, you will be asked by an employee if they can avail of a cash advance. Are you required to provide this? If so, how much should you release? When are they supposed to pay it back? Let's tackle these in today's article.

Are you required by law to provide a cash advance?

I remember my client named Fred who told me that his employee threatened to file a complaint with DOLE if he didn't release a cash advance. He said that his child was in the hospital and it was his right to get a hold of his salary to pay for the medical expenses. The employee added that he couldn't understand why his employer was making things hard for him considering that they had a right to the fruits of their labor.

You may be encountering the same issues with your employee. Let's tackle what the law says about this to enable you to deal with the issue better.

Let's get some misconceptions out of the way.

First, there is nothing in the law which requires an employer to release cash 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 cash 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."

Next, 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 law. It could be for emergencies, for tuition, for vacation, for house repairs… could be anything. But none of these automatically grant you a benefit to get money ahead of your salary date. In short, it doesn't matter what the reason is, employees can't demand cash advances from their employer as a matter of right. They only have rights to the benefits and pay enumerated in the law or already granted by the company policies in place.

Third, 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 you feel that you want to give it, you can under the principle of management prerogative. If ever you decide to provide this, my strong advice is to set limits. Let's talk about that now.

If you're giving a cash advance, how much "should" you give?

I'm going to give you 2 things to think about when granting cash advances. As with all benefits, you make a terrible mistake if you don't set boundaries. Hopefully these 2 things protect you as an employer:

Balance the needs

First boundary you should set is how much money are you willing to release as cash advance ? You have 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 you have to comply.

This is because of the risk of non-payment. Be aware that there have been cases where the employee goes on AWOL after getting cash advances. So be prepared to lose this advance if the worst case scenario. Do not release excessive funds which may adversely affect the company's cashflow irrevocably.

Be clear when it is available

My first tip is to be clear on what circumstances you will consider giving a cash advance. What circumstances do I mean?

  • is this available upon request?
  • how frequently? Can they do this on a monthly basis? Daily? Yearly?
  • is there a limit to the amount?
  • how soon are they supposed to pay it back?
  • are there special circumstances before they become eligible (medical emergency, tuition, christmas, etc)

Since the law gave the employer the discretion to determine these factors, you may want to choose what makes sense to you and your employee's situation. The point is that you have a clear picture when this benefit may be availed of.

The worst thing is to make it wholly discretionary without any guidelines. You will be accused of favoritism if you grant this to certain employees and withold it from others without any guiding principles.

Secure yourself

Now we're tackled the parameters, let me leave you with a few more reminders on the implementation side.

1. Have the employee write a request for the cash advance.

It is important that you document the request. I've had cases where the employee denied requesting the amount. That way, this amount may be differentiated from allowances, bonuses and salaries.

2. Have the receipt of the money documented

You should have an acknowledgement receipt to document the receipt of the money. I've also handled cases where employees denied the receipt of the money. This is especially tricky when it comes to cash advances. I cannot overemphasize the need to document this.

3. Have a payment plan at the time you release… not after

Every grant of a cash 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 loan if the employee leaves or resigns (clue: it should be immediately due).

With the payment plan, you should also integrate an authorization to deduct. In simple terms, this means that the employee agrees to deduct the payments from his future salary and benefits. This saves you from concerns about illegal deductions down the line.


So today, we discussed:

  1. Cash advances are not mandatory
  2. You can opt to give cash advances
  3. You should put limits on how you give cash advances

Hope this helps you know how to answer if your employee asks for a cash advance. If you need help with the documentation I suggested, you should refer this to your legal team. Or if you need help getting that set up, email me at so we can discuss how you can get a legal team of your own.

Now we've simplified this, go out and make better choices!

P.S. We have a course that teaches you how to handle AWOL cases. Take a look here:

AWOL 3-Part Mini Video Course