What is a reserve payment?

Article author
Ercus Finn-Phillips
  • Updated

A reserve payment is an amount collected by Remote on a client’s behalf to safeguard against potential large or unexpected severance costs when an employee is terminated, or to mitigate the exposure associated with offering 30-day payment terms.

Typically, employees are entitled to statutory severance payments upon termination or/and other non-statutory payments, and these reserve payments ensure that funds are available to cover such obligations.

Reserves are an industry standard practice, and any unused amounts can be refunded to the client when an employee resigns or is terminated, after covering any applicable termination costs, provided there are no other outstanding payments.

Why would a reserve be required?

Remote takes a number of factors into consideration when deciding on reserves, these include the financial exposure associated with an account and the countries employees are being hired in.

Additionally, we request reserve payments to enable 30-day payment terms for our customers instead of the standard 14-day terms upon customer's request.

Also check: When is a reserve refunded?

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