A payroll advance is when you pay an employee early for work they will do later. You'll recover the money back from their future paychecks.
If you already paid the advance outside of Gusto, you’ll report it as non-Gusto payment.
Get it in writing: Before giving an advance, write down when and how the employee will pay you back.
Company responsibility: Once you give an advance, your company pays the money upfront and gets it back from the employee's future paychecks. Make sure payback does not bring employee pay below minimum wage.
Get expert help: You should follow all local and state laws about wage advances. Upgrade to a plan with Priority support to chat with HR experts who can help you follow the rules.
To process a payroll advance, follow these steps.
Click the Pay section.
On the right side, click Off-cycle payroll.
Under Why are you running this off-cycle payroll? select Other.
Select the employee(s) getting the advance. Use the search bar, filter by department/job title, or check the boxes.
Enter a work period - the time frame when the employee worked (or will work) to earn this payment.
Note: If the employee requested time off during this period, it will be included and paid out.
Off-cycle payrolls do not accrue time off.
Select the payment date.
Choose your bank account (if you have multiple accounts set up).
Decide on deductions and contributions:
Block all deductions: No benefit deductions or contributions
Important: 401(k) deductions cannot be turned off due to plan requirements.
Make regular deductions: All normal benefit deductions and contributions.
If Gusto manages your benefits, standard benefits will not apply unless you choose to include them.
Review tax withholding rates. Click Edit rates to make changes.
Enter the advance as a one-time reimbursement in the Reimbursement column (or + Reimbursement in the legacy view).
Enter the take-home (net) amount of the advance, not the gross wages. On the next regular payroll, you’ll enter a post-tax deduction for their regular wages. This ensures the taxes are properly calculated.
Add a personal note (optional) to specify this is an advance.
Click Save & continue.
Add any time off or sick hours for the selected employees
Click Save & continue.
Review all details.
Click Submit payroll when ready, or Go back to make changes.
After you process the advance, set up a one-time post-tax deduction for the advance amount to recover the payment. On the next regular payroll:
The amount paid in advance will be deducted from the employee’s pay
The money will remain in your company bank account
The advance amount will be taxed
Employees will see the full amount of payroll taxes (current payroll wages + advance wages) deducted from their pay
This completes the repayment process. Always keep records of advances and repayments.
Q: What's the difference between an advance and a bonus?
A: An advance is money for future work that gets paid back. A bonus is extra money the employee keeps.
Q: Can I give advances to any employee?
A: Check your local laws and company policies. Some states have specific rules about wage advances.
Q: What if the employee quits before paying back the advance?
A: This depends on your written agreement and local laws. Get legal advice for your specific situation.
Q: How do I make sure I do not go below minimum wage when collecting repayment?
A: Calculate the employee's hourly rate after the deduction. Make sure it's still at or above minimum wage.
Q: Can I charge interest on advances?
A: This depends on local laws. Many states do not allow interest on wage advances.