There might be instances where you've agreed to give a salary advance to an employee. A salary advance is not a loan, there is no interest charged to the employee.
💡 Salary advances are taxed like regular income. When agreeing the amount to send to the employee, make sure to specify this amount will be subject to employment taxes.
⚠️ If yearly salary advances for an employee amount to more than £10,000, HMRC may consider them as a Benefit in Kind. In this instance salary advances for more than £10,000 will need to be reported through a P11D form. Read more about HMRC's guidance here.
How to pay a salary advance
You can process a salary advance in Onfolk in two steps: first by adding the amount as a bonus, then by deducting this same amount in the following month's payroll.
1. Add a bonus
(See also: Add a bonus)
First step will be to send the salary advance to the employee, in payroll.
Go to the Payroll tab
Click on the current pay period
Scroll down to the team member you want to add a bonus for
Expand their row by clicking on it
Click the “+ Add bonus” button
6. Add the bonus amount - add "salary advance" or the description of your choice.
2. Reconcile the salary advance
You'll then need to deduct this same amount paid as a salary advance, to reconcile it. This is usually done in the following month's payroll, however you can do this later if agreed with the employee.
To reconcile the advance, deduct the same amount initially payrolled through a negative bonus:
Go to the Payroll tab
Click on the current pay period
Scroll down to the team member you want to add a bonus for
Expand their row by clicking on it
Click the “+ Add bonus” button
6. Add the same amount you initially added as a bonus, but as a negative amount.
For eg, if you've sent a £2,000 salary advance in Step 1, enter £-2,000 as a negative bonus.
7. Add the salary advance's description, and you're done!