Page 267 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
I N THE REAL WORLD
The Proper Use

of Payroll Advances

The newly hired controller of a small manufacturing business was
looking to improve efficiencies within the accounting department
and noticed that payrolls were being calculated and distributed once
a week. In an effort to reduce the payroll staff’s workload, she
decided to shift these tasks to once every two weeks. However,
many of the people in the production department were clearly living
from paycheck to paycheck, and would have great difficulty waiting
an extra week to be paid during the initial changeover. To alleviate
this problem, she offered to extend pay advances to everyone for
the first two months, in gradually declining amounts, so they could
slowly build up enough cash to tolerate the new payroll cycle. After
the two months, she gave everyone the address of a local finance
company to give them further assistance, in order to keep the com-
pany from becoming an occasional no-interest lender of advances to
its employees.

wages are usually easy to follow, because this is a rare circumstance. Of
the options presented for paying employees, cash payments are the least
recommended,since this option requires additional controls over increased
levels of cash on hand and is more labor-intensive to process than other
payment methods.

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