Is it legal to charge interest on an employee advance?

Question

Is it legal in the US to charge interest when an employee receives on advance on payroll?

Answer 1

dont do it. its evil

Answer 2

if you want to go that route, it is legal. you should probably have a promissory note signed by your employee that describes the terms of the advance (including interest)

in practice, however, most companies do not charge interest on payroll advances. "advances" are usually given as a courtesy to a good employee in a jam.

charging interest nullifies the good will and places the company in a situation to earn money from an employee's time of need.

Answer 3

I am not a legal person, but I wouldn't think you could not charge interest. You are, after all, advancing the person money that will belong to them anyway. They are not borrowing it with the intention of paying it back, which is what interest is for. They are merely asking you to do a favor and pay them early.
You might need to ask a lawyer or you could go to a local business and ask the payroll clerk.

Answer 4

Thats pretty dirty of an employer to do that. They are paying you days even weeks after you have done the work. So charging interest on paying an advance is dirty since the employee is always getting paid well after thier work has been completed.

Answer 5

Sure. It's subject to usury laws as far as state maximums but the employer can charge interest. At my company when you get a raise you can get it as a lump sum (an advance) but your paycheck is reduced by a little more than the amount of the raise, in effect charging interest on the advance.

Answer 6

It is legal but the only deductions permitted from your paycheck are taxes and any deductions you expressly authorize. So if you don't authorize a deduction for interest, your employer cannot take it out. Of course, if you don't authorize, you may not get the advance.