How many times have you not reached the fortnight due to overspending, or due to some unforeseen event that unbalances your finances? This situation is more common than you think. Especially when inflation is high like now, so consumers look for different ways to buy the same amount of goods and services, trying not to affect their economy too much.
The National Consumer Price Index (INPC) of Mexico stood at 7.94% year-on-year in the first half of January, according to the National Institute of Statistics and Geography (Inegi).
This has an impact on people’s pockets, since with high inflation, stores sell the same, but consumers do not usually buy the same. In this sense, they are the ones looking for options to be able to cover their expenses.
According to a study carried out by HARO, an on-demand salary platform, at least 11% of formal Mexican workers allocate between 75% and 100% of their salary to pay debts.
When you find yourself in a situation where you need money to settle some of your expenses, it is common to use a credit card, borrow money from your loved ones or apply for a bank loan, which could help you to cover any expense that is out of reach. your budget, however, there is also the option of salary on demand. But is it really worth applying for? payroll advance?
What is salary on demand?
The salary on demand, payroll advance or labor advances, as its name indicates, are these payments that the employer makes to the worker in advance, before the payment date.
The advance can also be considered as a loan and depending on the destination and the use that it is going to have, it can be taken into account as real, personal or mixed. The first case responds to purchases or mortgages, the second to guarantees and the third to guarantee trusts.
Moisés Finkler, CEO of Yo Dispongo, a payroll advance platform, explains in an interview that, because there is currently high inflation and high interest rates, there are several employees who choose to request a salary advance to avoid resorting to any loan either credit that makes them face interest, in case of being late with their payments.
If any collaborator were to have an emergency or need, what we allow them with the salary on demand is to have access to this salary and to work, what we seek at all times is that the workers do not get into debt, that they can dispose of immediately the money, preventing them from having to ask for a loan or credit from outside”,
assured the CEO of Yo Dispongo.
By giving them access to their salary already worked, employees can solve their lack of liquidity immediately so that they can cover their financial commitments without having to wait for payroll and avoiding incurring credit penalties.
The director of Yo Dispongo said that they have worked with around 35 companies in Mexico and have given more than 20,000 payroll advances, with agreements in both large companies and SMEs. finkler explained the model in which the Mexican startup operates: The first is that the employee pays $39 pesos in advance, regardless of the amount to be withdrawn.. In the second, which is more business-like, they charge a monthly fee to the company with which they have an agreement so that employees can use this service without having to pay for that benefit.
What are the risks of salary on demand?
The payroll advance is a benefit that employees have, but finkler ensures that if it is not used correctly, it can have a negative impact on the worker. The specialist urged that people should have financial education, since they will help you evaluate in which cases it is really convenient to request a salary advance, credit or loan. Analyzing each situation and studying it can help you significantly so that you have healthy finances.
wolfgang erhardtspokesperson for the Credit Bureau, considers that it is okay to use payroll advances as long as it is with established companies and fintechand verify that they are formal companies, and if you are going to go with them frequently, it is better to order your personal finances and make a budget.
What does the Federal Labor Law say about labor advances?
According to information from Runa, a leading payroll and benefits platform, the following was indicated from a legal point of view based on the Federal Labor Law:
- In section I of article 110 of the Federal Labor Law, the possibility of discounting salaries when they come from an advance is written and dictated to employers. This is due to the expense that it generates and the debts that are contracted for the effort to make an advance on salary. However, the worker must be aware of the deduction to be made and demonstrate his agreement with the specified and mentioned amount, which, for his part, must not exceed 30% of the excess of the minimum wage.
- Section III of article 110 says that employers are prohibited from charging interest on salary advances.
The requirements to deliver a labor advance are the following: define the good or service that you want to provide, specify the total price if you have it and agree on the bilaterality of the matter (both parties are aware of the effects, actions and obligations).
Finally, we must reiterate the importance of having financial education and being prepared before requesting any type of loan, because this way we avoid falling into debts that may affect us in the long run and you are forced to frequently ask for your payroll to be advanced.
The important thing is always to make a budget, we cannot live without one, it is the only tool that will prevent you from having a money or debt problem. If you fall short in the fortnight, it is because you are spending more, living outside your means ”,
Erhardt commented.
So if you are in a situation where you do not know where the money is going, it is necessary to make adjustments, evaluating your income and expenses, so that the latter are not greater or destabilize your finances.
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Paola Perez Sirvent Passionate about travel, photography and gastronomy. She collaborates in volunteer projects.