An advance (money given against salary, no interest) and a loan (money given over several months, usually with interest) are both entered as a loan type. The type decides whether interest is charged. Everything else (how much, how many installments) is chosen per loan (Ask for, approve and issue a loan or advance).
Open Payroll setup (Payroll › Settings) and the Advance tab.
Add a type
1
Press Add
Who
Payroll officer
Where
Payroll setup › Advance › Add
What changes
The form opens.
2
Name it
What changes
Enter the Loan name, for example "Salary advance" or "Festival loan". A name already used is refused.
3
Say whether interest applies
What changes
Tick Interest applicable and enter the Interest rate (%) (a yearly rate; not more than 100: the screen says "Interest rate should not exceed more than 100."). Leave it unticked for an advance with no interest.
4
Save
What changes
The type is offered when an employee asks for a loan or HR issues one.
You can Edit, Activate, Deactivate or Delete a type. Do not delete a type that has loans.
The company limit
On Payroll configuration, Loan (Max no of salary month) sets the most any one loan may be: that many months of the employee's basic salary (Payroll configuration).
Common questions
I changed the interest rate of a type. Do loans already issued change?
No. A loan keeps the interest rate it was issued with. The new rate applies to loans issued afterwards.
