Advance Salary

Advance salary is a financial provision that allows employees to receive a portion of their upcoming salary before the regular payday. Unlike loans, which involve repayment over multiple months with potential interest, salary advances are typically short-term and settled through one-time or short-term salary deductions. Udyamo HRMS provides a dedicated advance salary module with an approval workflow, flexible settlement options, and full payroll integration.

This chapter covers how employees request salary advances, how administrators approve and manage them, the different settlement methods, and how advances integrate with the payroll cycle.

What You Will Learn

• What advance salary is and how it differs from a loan
• How employees request a salary advance
• The approval workflow for advance requests
• Settlement types: salary deduction and manual settlement
• EMI terms for salary deduction settlements
• Advance status tracking
• Payroll integration for automatic deduction
• Viewing advance history
• Policies for advance eligibility

Prerequisites

Required: Before using the advance salary module:

• The Advance feature toggle is enabled in Settings > Features
• Payroll is configured and operational (see Running Payroll)
• Employee salary structures are assigned (see Salary Structures)

Understanding Advance Salary vs. Loans

Before diving into configuration, it is important to understand how advance salary differs from employee loans:

Understanding the Advance Salary Model

The AdvanceSalary model in Udyamo HRMS tracks each advance with the following key fields:

Requesting an Advance Salary

How an Employee Submits a Request

1. The employee logs in to Udyamo HRMS.
2. From the self-service portal, navigates to Finance > Advance Salary (or My Advances).
3. Clicks Request Advance (or New Advance Request).
4. Fills in the request form:

5. Clicks Submit.

What Happens After Submission

1. The advance request is created with a status of Pending.
2. A notification is sent to the administrator or designated approver.
3. The employee can view the pending request under My Advances.
4. The request displays the requested amount, reason, and submission date.

Tip: Encourage employees to provide a clear, specific reason for the advance request. This helps administrators make faster approval decisions.

Approval Workflow

Status Flow

The advance salary progresses through four statuses:

Pending  -->  Approved  -->  Disbursed  -->  Settled

Reviewing and Approving an Advance Request

1. From the sidebar, click Finance > Advance Salary (or navigate to the advance requests page).
2. Filter by status Pending to see all awaiting requests.
3. Click on a request to review:
   • Employee name and ID
   • Department and designation
   • Requested amount
   • Reason provided
   • Employee's current monthly salary
   • Any existing active advances

Setting the Approved Amount

The administrator may approve the full requested amount or a different amount:

Selecting the Settlement Type

When approving, the administrator must choose how the advance will be recovered:

Setting EMI Terms (for Salary Deduction)

If the settlement type is Salary Deduction, the administrator sets the EMI terms:

The monthly deduction is calculated as:

Monthly Deduction = Approved Amount / Number of Instalments

Example

Completing the Approval

1. Set the Approved Amount.
2. Select the Settlement Type (Salary Deduction or Manual).
3. If Salary Deduction, enter the Number of Instalments.
4. Click Approve.
5. The status changes to Approved and the employee is notified.

To reject the request:

1. Click Reject (or Deny).
2. Enter a reason for rejection.
3. Click Confirm.
4. The employee is notified of the rejection with the reason.

Warning: Once an advance is approved and disbursed, the settlement terms cannot be easily changed. Verify the approved amount and instalment count before finalizing approval.

Disbursement

After approval, the actual disbursement of the advance amount happens outside the system (via bank transfer, cheque, or cash).

Marking an Advance as Disbursed

1. Open the approved advance.
2. Click Mark as Disbursed.
3. Optionally enter:
   • Disbursement date
   • Payment method (bank transfer, cheque, cash)
   • Reference number (cheque number or transaction ID)
4. Click Save.
5. The status changes to Disbursed.

Tip: Once an advance is marked as Disbursed with the settlement type set to Salary Deduction, the automatic payroll deductions begin from the next payroll cycle.

Settlement — Salary Deduction

When the settlement type is Salary Deduction, Udyamo HRMS automatically deducts the instalment amount from the employee's salary during each payroll run.

How Automatic Deduction Works

Viewing Advance Deductions on Payslips

1. Navigate to Payroll > Payslips.
2. Select the month and click on an employee's payslip.
3. The Deductions section shows Advance Salary Recovery (or similar label) with the monthly instalment amount.

Instalment Tracking

The advance detail page shows the recovery progress:

Tip: If an employee's net salary in a given month is insufficient to cover the advance instalment (e.g., due to leave without pay), the deduction may be partial or deferred. Review such cases manually and adjust the recovery schedule.

Settlement — Manual

When the settlement type is Manual, the administrator records the settlement outside the payroll system.

How Manual Settlement Works

1. The advance is disbursed to the employee.
2. The employee returns the amount through a method outside payroll (e.g., cash, cheque, bank transfer).
3. The administrator opens the advance record.
4. Clicks Record Settlement (or Mark as Settled).
5. Enters the settlement details:

6. Clicks Save.
7. The advance status changes to Settled.

Warning: For manual settlements, there is no automatic payroll integration. Ensure you update the advance status promptly to prevent the system from attempting salary deductions.

Viewing Advance History

For Employees

1. Log in to Udyamo HRMS.
2. Navigate to My Advances (or Finance > Advance Salary).
3. The page displays all advance requests, sorted by date.
4. Filter by status: Pending, Approved, Disbursed, or Settled.
5. Click on any advance to view full details including:
   • Requested and approved amounts
   • Settlement type and EMI terms
   • Recovery schedule (for salary deduction)
   • Current remaining balance

For Administrators

1. Navigate to Finance > Advance Salary.
2. The list shows all advance requests across the organization.
3. Use filters to narrow down:

Policies for Advance Eligibility

Organizations should establish clear policies for advance salary eligibility. While Udyamo HRMS enforces some validation rules, having a documented policy helps set expectations.

Recommended Policy Parameters

Configuring Policy Rules

Some of these policies can be configured in Udyamo HRMS:

1. Navigate to Settings > Finance > Advance Settings (if available).
2. Set the parameters according to your organization's policy.
3. Click Save.

For policies that cannot be enforced through system settings, document them in your employee handbook and communicate them clearly to all employees.

Tip: A well-documented advance salary policy prevents misuse and ensures fairness. Make the policy available to all employees through the company handbook or an announcement.

Advance Salary Reports

Available Reports

Generating an Advance Report

1. From the sidebar, click Reports.
2. Select Advance Salary Report (or Finance Reports > Advances).
3. Choose the report type.
4. Select the Period (month, quarter, or year).
5. Apply optional filters (department, status, settlement type).
6. Click Generate.
7. Review the results on screen.
8. Click Export to download in Excel or PDF format.

Integration with Other Modules

Payroll

• Salary Deduction settlements are automatically included in the monthly payroll run.
• The deduction appears as a separate line item on the payslip.
• If the employee has both a loan EMI and an advance recovery in the same month, both are deducted.

Full-and-Final Settlement

• If an employee exits the organization with an outstanding advance balance, the remaining amount is included in the full-and-final settlement calculation.
• The outstanding advance is deducted from the employee's final payout.
• See Offboarding & Full-and-Final for details.

Leave Without Pay

• If an employee is on leave without pay and has no salary for the month, the advance recovery is deferred to the next month with salary.
• Administrators should monitor such cases to ensure the advance is eventually settled.

Troubleshooting

Best Practices

Next Steps

• Review Loan Management for larger financial needs — see Loan Management
• Review Reimbursements for expense claims — see Reimbursements
• Understand full-and-final settlement — see Offboarding & Full-and-Final