Section 87 of the Employment Act (Chapter 373) regulates advances. It is short, and every subsection has teeth.
Section 87(1) — the threshold
An employer shall not, without the approval of a labour officer, make an advance of wages to an employee exceeding 50% of one month’s wages.
So an advance up to half a month’s wages is a matter for the employer and employee. Anything above that requires a labour officer’s approval, obtained before the advance is made.
Section 87(2) — the excess is not recoverable
A sum advanced in excess of 50% of one month’s wages is not recoverable by the employer unless the employer obtained an approval under subsection (1) before the advance was made.
This is an unusually direct sanction. It is not a fine; it is the loss of the debt. An employer that advances a large sum without approval — often, in practice, to a worker in difficulty, and often with the best of intentions — cannot recover the part above the threshold.
A large advance repaid by deduction over many pay periods binds the worker to the employer, which is precisely the dependency the Act is designed to prevent. Compare section 91, which prohibits any deduction by way of discount, interest or similar charge for an advance, or as a reward for providing or retaining employment; and section 92, which forbids an employer limiting the employee’s right to dispose of his wages.
Section 87(3) — the 25% recovery cap
An advance may be recovered by deductions from the wages of the employee — but in no case shall more than 25% of the net wages due to the employee for any pay period be deducted for that purpose.
Note three things:
- The cap is on net wages, not gross.
- It is 25% per pay period, for the advance alone.
- It sits inside the overall section 88(4) cap of 50% of the wages for the period. Where housing rent, fund contributions and an advance are all being deducted, the total still cannot exceed 50%.
An advance is a permitted deduction under section 88(1)(i), which means it also needs the employee’s prior written consent under section 88(2) — witnessed by a labour officer for an attested contract — and its reason must appear on the pay statement under section 82(d) and in the section 83 register.
Section 87(4) — recovery when the job ends
Where an advance has not been recovered at the time of termination or expiration of the contract, the employer may recover the whole of the amount outstanding from any wages payable to the employee.
The 25% cap does not apply at the end. The whole outstanding balance may be taken from final pay.
Section 87(4) is expressed to be subject to subsections (1) and (2). So an unapproved advance above the 50% threshold remains not recoverable — including out of final pay. An employer cannot cure the missing approval by waiting until the employee leaves.
A worked example
| Step | Figure |
|---|---|
| Monthly wage | K2,000 |
| Advance permitted without approval (50% of one month) | K1,000 |
| Advance actually made, no labour officer approval | K1,600 |
| Recoverable | K1,000 — the K600 excess is not recoverable (s 87(2)) |
| Net wages per fortnightly pay period | K800 |
| Maximum deduction per period for the advance (25% of net) | K200 |
| All deductions combined per period (s 88(4)) | Not more than 50% of the wages for the period |
| On termination with K400 outstanding | The whole K400 may be taken from final pay (s 87(4)) |
Section 109 — advances by worker-recruiters
Section 109 provides that advances made in the course of recruiting are subject to section 87. A recruiter cannot escape the threshold, the approval requirement or the recovery cap by advancing money at the point of engagement rather than during employment.
That matters because an advance given at recruitment — for travel, for a village obligation, for goods — is the classic mechanism of debt-based control. Read it with section 133, which makes fraud, intimidation, coercion or undue influence for employment purposes an offence, and with the repatriation obligations in Division 7.
Before you take an advance
- Work out 50% of one month’s wages. Above that, the employer needs a labour officer’s approval first.
- Ask to see the approval if the advance exceeds the threshold — it protects both sides.
- Agree the repayment in writing, and check it is no more than 25% of net wages per period.
- Check no interest or charge is being added — section 91 prohibits it.
- Check the deduction and its reason appear on the pay statement.
- Add up all deductions — the combined total cannot exceed 50%.
- On leaving, expect the balance to come out of final pay — but not any unapproved excess.
Sources
- Employment Act (Chapter 373) — ss 82, 83, 87–92, 109, 133; Part III Division 7
- Industrial Relations Act — PacLII 1986 Revised Edition
- Bar v Kora [2008] PGNC 17; N3290
Before relying on anything here, read the current text of the Employment Act (Chapter 373) and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.