Why workers should opt for Salary Advance instead of Loans
Are you thinking of why workers should opt for Salary Advance instead of Loans? Do you know that, financial institutions do not give you free money and that your employer stands to benefit if it institutes salary advance schemes and runs them smoothly?
There are many instances where workers find it difficult to raise the needed finance for a particular project, activity, or personal needs and have to seek some form of financial support, be it a loan (credit facility) or a salary advance. Very often, employees opt for loans from their bankers or credit unions or other individuals with very high-interest rates.
Salary Advance, Loans, And Employee Financial Distress Statistics
Research has established that 37 out of every 100 thus 37% of employees face some form of financial distress. Some businesses are so poorly managed and financially handicapped that, they can not offer any form of salary advance to their employees, hence workers may not even ask for a salary advance.
Banks and financial institutions have trapped many workers with payday loans, which ensure you can take a loan ahead of the next pay cheque. But why do that if your employer is there?
Even where a bank provides workers with salary advances, it is actually a Salary Advance Loan because banks do not provide free launch kind of loans. Such facilities may be provided, and you may have to settle the advance within six months or even less with interest.
Few employees ever consider the option of a Salary Advance as a means of financing their particular project, activity, or personal needs.
While a loan comes with its own huge interest charges and the likelihood of default, a salary advance, which is simply the receipt of your future pay cheques now from the employer so that some amount of money is deducted from your pay regularly over a period of time without the need to pay interest on the amount.
For example, if your monthly income is GHS3500.00, you may apply for an advance salary of let’s say GHS10,000.00 from your employer through a letter that explains the reasons why you are applying for the said facility and also indicates how much should be deducted from your salaries to repay the advance salary.
Employers need to help their employees by providing them with Salary Advance funds instead of recommending loans for them. Providing employees with Salary Advance Services is a way of showing concern for employees and saving them from high-interest rates. Such salary advances can further boost employee commitment to company goals and work even harder.
Employees feel very appreciated and valued if their employer provides them with a salary advance. They get less worried about their financial scarcity, and that boosts their concentration at work and productivity.
Employers who have instituted Salary Advance Schemes will also be able to retain the best staff and gives you an edge over other companies. This further boosts employee morale and loyalty.
Providing employees with salary advances further shows that the employer is interested in the welfare of its workers.
Employees can also institute a welfare scheme with the help of their employer to help themselves. Very often employees are reluctant to join welfare schemes due to previous bad experiences where those put in charge misuse and abuse the funds of members and the office only to exit the company. Welfare schemes can provide the needed funds to those who need them if it is well organized. The interest charged by welfare schemes at work could be described as near-zero interest, which helps workers as well.
How does a salary advance work?
- You seek early pay or the payment of your future salaries now. For instance, three months’ salary advance.
- You inform the employer, often through writing.
- If it is approved, the finance or accounting department processes the funds and is often paid into your bank account.
- You also get to know how much will be deducted from subsequent salaries to repay the advance. Normally this will be up to 40% of your salary.
- The face value which is equal to 40% is deducted every month before your pay hits your bank account till the last deduction.
From the above, it is clear Why Workers Should Opt For Salary Advance Instead of Loans. Loans should be the last option after every effort to get a salary advance or funds from other sources which do not come with interest charges. Find out from your organization if they offer salary advances to employees and how can you apply.
READ: Link Bank Account to Ghana Card, don’t wait till last minute – GAB
Again, if there is no salary advance scheme, the leadership of the employees should take this up and discuss it with management so that something can be done about it. You can save yourselves from paying interest to banks and reduce your financial stress.
Source: Ghana Education News
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