Regulations Governing Cash Advance Programmes Offered by Employers or Contractors

Mr Leon Perera asked the Minister for Law (a) what regulations govern cash advance programmes offered by employers or contractors; and (b) whether the Ministry is considering a cap on interest rates instituted for such programmes.

Employers may provide advances of salaries to their employees prior to festive occasions, or upon request by their employees. The recovery of such cash advances are regulated under the Employment Act. Under the Act, employers are allowed to recover the monies through salary deductions of no more than 25% of the salary each month, for up to 12 months. The Employment Act does not provide for interest to be charged for such cash advances.

Cash advance programmes offered by businesses to their contractors involving a sum of money lent in return for a larger sum may come under the ambit of the Moneylenders Act, depending on the nature and terms of the programme. Entities which offer cash advances as a business of moneylending require a licence or exemption under the Act. MinLaw may grant such licences or exemptions and impose conditions, including interest rates caps, as appropriate, taking into account the nature and terms of the programmes.