Employee loans and salary advances
Updated 2026-11-07
What it is
Loans and advances lets you lend money to an employee and take it back from their salary. You set how much to recover each month, either a fixed EMI or a percentage of monthly gross. PunchMe adds the recovery as a deduction in every payroll run until the loan is repaid.
A loan and a salary advance work the same way. The type only changes the label on the payslip: "Loan recovery" or "Salary advance recovery".
PunchMe does not move any money when you approve a loan. You pay the employee yourself. PunchMe only tracks and recovers it.
Who uses it
| Who | What they can do | Permission |
|---|---|---|
| Employees | Request a loan or advance (if allowed), see statements, cancel a pending request | None. Any employee with the app |
| Payroll team | See all loans and statements | payroll.view |
| Payroll team | Create, approve, reject, edit, hold months, close | payroll.manage |
| Owner or admin | Allow employee requests in the app | settings.edit |
Loans are company-wide, like payroll. People with an office-level or department-level role can't open loans, even with payroll permissions. The owner and the built-in HR role can. See Roles and permissions.
Where to find it
- Dashboard: Payroll, Loans & advances (
/payroll/loans). It lists every loan with amount, recovery, first month, outstanding balance and status. The total outstanding is shown at the top. - Employee page: each employee's page in the dashboard has a Loans & advances card.
- Manager app: loan requests appear in the Approvals inbox. You can reject there, but approving opens the dashboard (Approve on web), because approval needs recovery terms.
- Employee app: Profile tab, Loans.
Turning it on or off
HR can always create loans from the dashboard.
Employee requests from the app are off by default. To allow them, open Payroll, Payroll rules and tick Employees can request loans / salary advances in the app, then Save rules.
What happens when it's on / when it's off
On: employees see Request loan / advance in the app. Everyone with payroll.manage gets an in-app notification and an email for each request.
Off: the button is hidden and the app says the company doesn't take loan requests. Existing loans, statements and recoveries carry on as normal.
Creating a loan from the dashboard
- Open Payroll, Loans & advances and click New, or use New on the employee's page.
- Pick the employee, the type (Loan or Salary advance) and the Amount ₹.
- Set the recovery terms (below) and an optional note.
- Click Save. The loan is active at once.
How an employee request works
- In the app, the employee opens Profile, Loans and taps Request loan / advance.
- They choose Loan or Salary advance, enter the amount, an optional Preferred monthly EMI, and a reason (at least 3 characters).
- HR opens Payroll, Loans & advances, finds the request with status requested and clicks Approve or Reject.
- On approve, HR sets the recovery terms. The form starts with the employee's preferred EMI. HR can lower the amount, but not raise it above what was requested.
- The employee gets a push notification and an in-app message.
An employee can have only one request waiting at a time. They can tap Cancel request while it is still waiting.
Recovery terms
| Field | What it means |
|---|---|
| First recovery month | The first payroll month that deducts it |
| Recover by | Fixed EMI or % of monthly gross |
| EMI ₹ / month | A fixed amount each month |
| % of gross | A share of the employee's monthly gross from their latest salary structure, 0.1 to 100 |
| Interest % per month | Simple interest on the outstanding balance. 0 to 5. 0 means interest-free |
How each month is worked out
For each payroll month from the first recovery month:
- Interest = outstanding balance × monthly rate.
- Recovery = the EMI (or the % of gross), but never more than balance + interest.
- New balance = balance + interest − recovery.
Example: ₹30,000 at 1% a month with a ₹5,000 EMI.
| Month | Opening | Interest | EMI | Closing |
|---|---|---|---|---|
| 1 | ₹30,000 | ₹300 | ₹5,000 | ₹25,300 |
| 2 | ₹25,300 | ₹253 | ₹5,000 | ₹20,553 |
With interest, the EMI (or the % of the employee's current monthly gross) must be more than the first month's interest, or PunchMe refuses to save.
The % of gross is taken from the salary structure's full monthly gross, not the pay after loss-of-pay days.
Recovery in payroll
Each payroll run adds a deduction line per active loan, for example "Loan recovery". See Payroll.
- A draft run shows the planned recovery. The balance only goes down when the run is finalized.
- If an employee has several loans, each one gets its own line.
- Recoveries show in Tally and journal exports under "Loans & Advances to Employees".
- Recovery never takes net pay below zero: it is capped at what is left after other deductions, and the rest stays outstanding.
- In the employee's exit month, the whole outstanding balance (up to the pay available) is recovered in the full and final payslip, as "Loan recovery (F&F)". Held months are ignored then. See Onboarding and exit.
Statement
Click a loan in the dashboard, or tap it in the app, to see its statement:
- Principal, recovery terms and outstanding balance.
- One row per month: EMI, interest, balance and status.
- recovered: taken in a finalized payslip.
- scheduled: planned for a future run.
- hold: skipped.
The schedule shows up to 120 future months.
Changing it midway
- Edit recovery: on an active loan, click Edit to change the first recovery month, EMI or %, and interest. The new terms apply from the next payroll run drafted. Finalized months are not touched.
- Skip a month: open the statement, pick a month under Skip a month and click Hold. That month deducts nothing and charges no interest. Click the month chip to remove the hold.
- Close loan: on the statement, click Close loan. Recovery stops and any balance left is written off.
- Fully repaid: the loan shows closed once the balance reaches zero.
- Already-drafted payroll: changes don't reach a draft until you run it again.
- Finalized payroll: never changes. If you need to refund a recovery, use a payslip correction. See Payslips.
Limits and edge cases
- The amount can't be changed after approval. To change it, close the loan and create a new one.
- If pay is too low for the full EMI, only part is recovered that month and the balance stays outstanding. After an exit, recover any remainder outside PunchMe or close the loan.
- An employee with no salary structure isn't in the payroll run, so nothing is recovered.
- Employees can cancel only a request that is still waiting. They can't cancel an approved loan.
- Rejecting a request ends it. The employee can send a new one.
Related
Common questions
What's the difference between a loan and a salary advance?
Only the label. Both are recovered from salary the same way, with the same options.
Can I approve a loan request from the manager app?
You can reject it there. To approve, tap Approve on web. Approval needs the first recovery month and the EMI or %, which you set on the dashboard.
Why hasn't the outstanding balance gone down?
Recoveries only count once the payroll run is finalized. A draft shows the planned deduction but doesn't change the balance.
Can an employee pause repayments for a month?
Yes, if HR agrees. Open the loan statement, pick the month under Skip a month and click Hold.
What happens to the loan when someone resigns?
The full outstanding balance is deducted in their last payroll month as part of full and final settlement.
Does PunchMe pay the loan amount to the employee?
No. Pay the employee from your bank yourself. PunchMe tracks the loan and recovers it through payroll.