Employee pay advance policy for a restaurant or café: a request form, a repayment agreement and the federal wage rules

A line cook asks for $300 on a Tuesday because their car broke down and payday is ten days away. You want to help; they've been with you two years. But the last time you said yes to someone, they quit a week later, and nobody had written down how it would be paid back.

A pay advance can keep a good person through a bad week. Done without rules, it turns into favoritism, awkward conversations and, sometimes, a paycheck that breaks the minimum wage. This post covers the federal rules on deducting an advance, and gives you a policy, a request form, a repayment agreement and a log.

General information, not legal or tax advice. These are the federal wage rules. Many states have their own rules on what can be deducted from a paycheck and when, including the final one, and those can be stricter. Check with your state labor department and your payroll provider before the first advance.

What the federal rules say

The Labor Department's Field Operations Handbook, the manual for its Wage and Hour investigators, treats an advance differently from other deductions (DOL WHD Field Operations Handbook, Chapter 30):

The "free and clear" rule comes from the regulations: wages "cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or 'free and clear'" (29 CFR 531.35).

What that means for your policy:

• Write it down and get a signature. The handbook expects the advance to be verifiable. A signed agreement with the amount, the date and the repayment plan is your record.
• No interest, no fees. Charging either risks cutting into the minimum wage, and it isn't worth the money.
• Keep it an advance, not something else. A "loan" repaid from tips, or money docked for a shortage and called an advance, is a different deduction with stricter rules.
• Tipped staff need extra care. For someone paid with a tip credit, the handbook says "An employee paid with the FLSA 3(m)(2)(A) tip credit has only been paid the FLSA minimum wage in non-overtime workweeks" (30d14(a)). Ask your payroll provider or an employment lawyer before deducting anything from a tipped employee's pay, and never take repayment out of their tips.
• Spread repayment out. Even where the law lets you take it all at once, a repayment over several paychecks is kinder and easier to keep track of.

Decide your rules first

Fill these in before you print the policy, and apply them to everyone the same way.

Advancing earned wages (pay for hours already worked this period) is the simplest version: nothing is lent, the person is just paid early for work they've done, and repayment is the next paycheck being smaller. Some payroll providers can run an off-cycle payment for this.

The pay advance policy

Pay advance policy · [restaurant name]

1. Who can ask. Any [employee who has worked here [90] days or more] can ask for a pay advance for any reason. You don't have to tell us why.
2. How much. Up to [your limit]. One advance at a time; a new one only after the last is paid back.
3. How to ask. Fill in the pay advance request form and give it to [the owner / general manager]. You'll get an answer within [1 business day].
4. How it's decided. We look at the amount, your repayment plan and whether you have an advance open. We apply the same rules to everyone. A no isn't a judgment of your work.
5. How you're paid. [In a separate payment through payroll / by check] within [days] of approval.
6. Paying it back. Through payroll, in the amounts on your signed agreement, starting with [the next paycheck]. No interest or fees.
7. If you leave. Any balance is taken from your final paycheck where the law allows; if it can't be, we'll agree a plan in writing.
8. Privacy. Only [the approver] and [whoever runs payroll] know about your advance.
9. This is a benefit, not a right. We may change or stop this policy. Changes don't affect advances already agreed.

Questions: [name, phone] · Policy date: [date]

The request form

Pay advance request · [restaurant name]

Name: …………………… · Position: …………………… · Date: ……………

Amount requested: $……………

How I'd like to pay it back: ☐ All from my next paycheck ☐ In [number] equal amounts of $…… from my next [number] paychecks ☐ Other: ……………………

I'd like the advance paid by: ☐ direct deposit ☐ check

I understand the advance will be deducted from my pay as above, with no interest or fees, and that any balance left when I stop working here will be deducted from my final paycheck where the law allows.

Signature: …………………… · Date: ……………

For the approver Approved ☐ Not approved ☐ · Amount approved: $…… · Any advance open now? ☐ yes ☐ no Approved by: …………………… · Date: …………… · Sent to payroll on: ……………

The repayment agreement

Pay advance repayment agreement · [restaurant name]

I, [employee name], received a pay advance of $[amount] from [business legal name] on [date].

I authorize [business legal name] to deduct the following amounts from my pay:

There is no interest or fee. If I stop working here before the advance is paid back, I authorize the balance to be deducted from my final paycheck where the law allows, and we'll agree in writing how anything left is handled.

Employee signature: …………………… · Date: …………… For the business: …………………… · Title: …………………… · Date: ……………

A copy goes to the employee and a copy to the payroll file.

The advance log

Kept by the owner or whoever runs payroll, not posted.

Pay advance log · [restaurant name] · [year]

Reviewed each pay period by: ……………………

Your pay advance checklist

• [ ] The decisions table filled in: who, how much, how often, who approves
• [ ] The policy shared with everyone, the same rules for everyone
• [ ] A signed request and a signed repayment agreement for every advance
• [ ] No interest and no fees
• [ ] Your payroll provider set up to pay the advance and take the repayments
• [ ] Your state's rules on deductions and final paychecks checked
• [ ] Extra care, and advice, before any deduction from a tipped employee
• [ ] The log reviewed each pay period

Where Mays fits

• Seeing what's been earned. An employee can open My Hours in the Mays app to see their hours for the pay period and an estimate of their pay before taxes, which helps them ask for an amount they've already earned. It's an estimate, "before taxes and deductions — not a paystub". See My Hours and estimated pay.
• Your side of the numbers. A pay period's Labor Summary tab shows each person's Wage, hours and Total Pay so far, so you can check an earned-wages limit before you approve. See Timesheets and pay periods.
• The policy where people can find it. Put the policy and a blank request form in a Knowledge Base folder; signed forms stay in the payroll file, not in Mays. See Knowledge base basics.

What Mays doesn't do: it doesn't pay advances, take requests for them or track repayments, and a pay period has no line for an advance or a deduction, so the payroll export doesn't carry them. Your payroll provider does that part. See Payroll export and Gusto.

Same rules for everyone, in writing, no interest, paid back through payroll

A pay advance policy is short: who can ask, how much, who decides, and how it comes back. Get every advance signed, charge nothing for it, let payroll handle the repayment, and be careful with tipped staff and final paychecks. Then a hard week for one of your people is a form, not a favor.

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