Loans
Efficiently manage employee loans and monthly repayments
Last updated
Efficiently manage employee loans and monthly repayments
Last updated
Efficiently manage employee loans and monthly repayments. There are two types of loans: one paid out directly through an employee's payslip, and another paid outside of the payroll system directly to an employee. Let's explore how these work:
There is no interest on loan amounts paid out to employees
To manage your loans and savings, navigate to Payroll / Loans & Savings.
Navigate to Payroll / Loans & Savings and select the Loans tab. You will be presented with the following page:
Employee Details: The first two columns contain the employee's number and name.
Loan amount: This represents the total outstanding loan balance the employee is yet to repay. It indicates the amount already paid out to the employee.
Pending Payout: Shows Directly Paid Loan that have been recorded for an employee but not yet processed in a finalised pay run.
Repayment per Pay Run: The fixed amount deducted from the employee's pay each month until the loan is fully repaid. This deduction will not exceed the loan amount.
How to add a loan:
When an employee is given a loan through cash, EFT, or other means—resulting in the direct deposit of funds into their bank account—or an expense is paid on their behalf, it involves a transaction outside the payroll system. To record such a loan, adhere to the two steps below:
These loans often cover urgent needs such as doctor visits, family emergencies, or essential home supplies and cannot be deferred until the end of the pay period for disbursement through payslips.
The first step is to capture the balance that was borrowed to the employee. Navigate to Payroll / Loans & Savings and select the Loans tab. The initial step in recording a loan paid outside the payroll is to update the employee’s loan balance to reflect the new debt.
Click on the three vertical dots located to the right of the employee's details.
Select 'Override Balance'.
A new window will then open for you to proceed with the update.
Enter the loan amount paid out to the employee in the 'Balance' field.
Click on 'Set Balance' to save the new loan balance.
The balance for the employee will update instantly. The next step is to set up the repayment amount, follow these steps:
Click on the three vertical dots to the right of the employee's details.
Choose 'Add Repayment'.
Provide a description: An optional field where you can enter details about the loan, which will appear on the employee's payslip under payouts and repayments for clarity and transparency.
Repayment amount: Set the amount to be deducted from the employee's payslip each pay period for loan repayment.
Select when the employee must start repayment:
Current period: Choosing this will mean the first repayment is deducted from the payslip on which the loan is disbursed.
Next period: Repayment will commence in the pay period following the loan disbursement.
For loans issued outside of the payroll system, it is advisable to commence repayments in the current period since the funds have already been disbursed to the employee.
This occurs when an employee borrows money, and the loan amount is paid out through their payslip. The loan amount paid to the employee is non-taxable and will not be included in their gross taxable remuneration. Directly paid out loans must be paid out on an employee's payslip before affecting their loan balance. Here's how to add a directly paid out loan:
Navigate to Payroll / Loans & Savings and select the Loans tab
Click on the three vertical dots located to the right of the employee's details.
Select "Add Payout"
The following window will appear:
Provide a description: An optional field where you can enter details about the loan, which will appear on the employee's payslip under payouts and repayments for clarity and transparency.
Total: Enter the full loan amount to be paid out on the employee's payslip.
Repayment amount: Set the amount to be deducted from the employee's payslip each pay period for loan repayment.
Select when the employee must start repayment:
Current period: Choosing this will mean the first repayment is deducted from the payslip on which the loan is paid out.
Next period: Repayment will commence in the pay period following the loan pay out.
After completing these steps, a tax free loan pay out will be automatically added to an employee's pay slip along with a repayment deduction.
When adding a Directly Paid Out Loan the loan balance will only increase after the current pay run is finalised.
To edit a loan pay out, please repeat the steps mentioned above. The existing values will be replaced with the new amounts provided.
For directly paid out loans, it is recommended to start repayments in the Next period. If you pay out a loan of R1000 on an employee's payslip and deduct R500 for repayment immediately, the effective loan amount for the employee is only R500.
Loan balances are shown on the payslip following the pay out of a loan to an employee. The payslip will typically display the initial loan payout, any loan deductions made, and the remaining loan balance. Please see the image below as an example of a Directly paid loan payout, a loan deduction and the loan balance:
Please be aware that the earnings and deductions added to an employee’s payslip are based on system templates and as such, cannot be directly edited or removed from the payslip itself. Any changes or adjustments must be conducted through the Loans & Savings module.
