Chapter 4, Problem 28AA

To determine

The situation when a payroll advance has been taken by a person for several weeks that too in a row.

Answer to Problem 28AA

The payroll advance several times in a row can create negative impact and will be harmful for the employee considering his future unexpected expenses. So it is better to have an agreement between the employer and the employee to fix a certain number of allowed payroll advances, say 1 or 2 in a year, which will ultimately make the employee manage his finances as per that.

Explanation of Solution

The basic need behind the payroll advance is the contingency expense which has emerged unexpectedly and for which payment cannot be delayed till the actual payday.

But taking the payroll advance several times that too in row is something not acceptable and can be harmful because they will be getting short payment next time and then again they will be in need of some advance to handle the unexpected expenses at that time.

This behavior of taking the several payrolls in row can bring the employee in a trap and he won’t be able to come out of it easily.

Economics Concept Introduction

Introduction:

Payroll advance can be basically defined as the short term loan provided by the employers to the employee to take the payroll funds in advance which is in the form of unsecured loans.