Coming soon. This feature isn't available in Octal HR yet — this guide is published ahead of release. For what’s available today, see the Help Center or contact us.
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Compliance configuration — this guide covers statutory, payroll, and regulatory settings. Octal HR is configurable for different countries, regions, and business requirements.
Advance vs. Employee Loan
A Salary Advance is a short-term, interest-free draw on an employee's upcoming salary — typically recovered in a single payroll cycle. It differs from an Employee Loan in several key ways:
Salary Advance
Amount capUp to 50% of gross
RepaymentNext payroll (1 cycle)
InterestAlways 0%
Approval levels1 (or auto)
EMI scheduleNot required
Section 36 ITONot applicable
Employee Loan
Amount capPolicy-defined
RepaymentMultiple cycles (EMI)
Interest0% or market rate
Approval levelsUp to 3 levels
EMI scheduleFull schedule generated
Section 36 ITOApplies if interest-free
Which to use? Use a salary advance for immediate, short-term liquidity (medical emergency, utility bill). Use an Employee Loan when the amount is large, multi-month repayment is needed, or policy categorises it as a formal loan (e.g., House Advance, Vehicle Advance).
Eligibility & Limits
Eligibility rules are set in Loans → Settings → Advance Policy and apply globally, with optional per-grade overrides.
| Rule | Default Value | Notes |
|---|---|---|
| Maximum advance amount | 50% of gross salary | System enforces hard cap at request time |
| Minimum service period | 3 confirmed months | Probationers excluded unless overridden |
| Maximum advances per year | 2 per calendar year | Counter resets on 1 January |
| Outstanding advance rule | No new advance if one is outstanding | Fully recovered advances do not count |
| Auto-approval threshold | ≤ PKR 25,000 | Requests above threshold require HR sign-off |
| Minimum net pay after recovery | 40% of gross must remain | Prevents payslip going negative |
Grade overrides: Go to Settings → Advance Policy → Grade Rules to set higher limits for senior grades — e.g., Grade 17+ may request up to PKR 100,000 or 60% of gross.
Applying for an Advance
Employees submit requests from the self-service portal; HR can also raise requests on behalf of employees.
Employee Self-Service
1
Go to My Pay → Salary Advance → Request Advance.
2
Enter the requested amount. The system shows real-time eligibility (remaining cap, outstanding balance).
3
Select the recovery month — defaults to the next payroll cycle.
4
Add a reason (optional but recommended for record-keeping).
5
Click Submit. A notification is sent to the approver (or auto-approved if within threshold).
HR / Admin Entry
1
Go to Loans → Salary Advances → + New Advance.
2
Search and select the employee.
3
Enter amount, disbursement date, and recovery month.
4
Set status to Approved and save. HR-created advances skip the approval workflow.
Payroll Recovery
Octal HR recovers salary advances automatically during payroll processing. No manual entry is needed once an advance is approved.
- Recovery month: Deducted in the payroll cycle selected at request time (default: next cycle).
- Single deduction: The full advance is deducted in one go — unlike EMI loans which spread over months.
- Late payroll cutoff: If payroll has already been finalised for the recovery month, recovery rolls to the following month automatically.
- Partial recovery: If net pay is insufficient (e.g., employee was on long leave), the system recovers what is possible and flags the balance for the next cycle.
- Separated employees: Any outstanding advance balance is deducted from the final F&F settlement before payment.
Minimum net pay floor: The system will not let recovery reduce net pay below 40% of gross (or the configured floor). If a recovery would breach this, it is automatically split across two months.
Payslip View
The advance recovery appears in the Deductions section of the payslip as "Salary Advance Recovery":
PAYSLIP — May 2026 | Emp #EMP-0047 — Hina Baig
Basic SalaryPKR 45,000
House Rent AllowancePKR 18,000
ConveyancePKR 5,000
Gross EarningsPKR 68,000
Income Tax (WHT)– PKR 4,200
EOBI– PKR 370
PESSI– PKR 1,500
Salary Advance Recovery– PKR 25,000
Net PayPKR 36,930
Employees can view advance status in My Pay → Salary Advance → History at any time, including before payslip generation.
Tax Rules & Configuration
Salary advances carry a simpler tax profile than formal employee loans.
- No Section 36 ITO imputed interest: Since a salary advance is a draw on earned wages — not a financial accommodation — FBR's imputed-interest provision does not apply, even though the advance is interest-free.
- No separate FBR reporting: Advances are not reported as a perquisite in the employee's tax certificate (IT-3 / Form 149).
- Income tax timing: The advance amount is already included in the employee's taxable salary for the month it is earned. The advance simply accelerates payment — it does not alter the WHT calculation.
- Payroll ledger: The advance creates a recoverable advance debit on the employee sub-ledger and is cleared when payroll recovery posts — no P&L impact for the employer.
Contrast with loans: Interest-free employee loans above the KIBOR threshold trigger a Section 36 ITO imputed benefit in the employee's salary income. Salary advances do not. See Loan Types for the full tax treatment.
Configure Advance Policy
Set global advance rules from Loans → Settings → Advance Policy.
1
Go to Loans → Settings and click the Advance Policy tab.
2
Set Maximum Advance Cap — enter a fixed PKR amount or a percentage of gross (e.g., 50%).
3
Set Minimum Service (Months) before an employee can request. Default: 3.
4
Set Advances Per Year limit. Default: 2. Set to 0 for unlimited.
5
Configure the Auto-Approval Threshold (PKR). Requests at or below this are approved instantly; requests above route to the line manager → HR chain.
6
Set the Minimum Net Pay Floor (% of gross). The system blocks or splits recovery if it would breach this floor.
7
(Optional) Add Grade Rules — click + Grade Override to set different caps or limits per pay grade.
8
Click Save Policy. Changes apply to all new advance requests immediately.
Changes are not retroactive. Updating the cap or limit does not affect advances already in an Approved or Disbursed state.