Before you lend
Have a written policy
Have a written policy
Who is eligible, the maximum amount, the maximum term, whether interest is charged, and what
happens if the employee leaves. Without a policy, every request becomes a negotiation.
Set your limits in payroll settings
Set your limits in payroll settings
Maximum amount and maximum term. Bumara enforces them, which saves you from making exceptions
under pressure.
Check the deduction cap
Check the deduction cap
Total deductions cannot exceed your configured maximum percentage of gross, commonly 50%. An
employee already carrying deductions may not have room for the instalment you are contemplating.
Put it in writing
Put it in writing
A signed loan agreement covering the amount, the term, the instalment, any interest, and what
happens on leaving. A verbal agreement is unenforceable and unpleasant to unwind.
Creating a loan
1
Open Payroll, then Loans, then Create loan
From the Payroll sidebar.
2
Enter the details
3
Check the calculated instalment
Bumara works it out from the principal, interest and number of instalments. Confirm the
employee can afford it alongside their existing deductions.
4
Save
The loan is created as Pending.
5
Activate it
Once the money has been paid to the employee, move it to Active. Instalments now deduct
from every pay run.
The loan lifecycle
Automatic repayment
Once active, the instalment is deducted in every pay run within the loan’s date range. You do not enter it in monthly inputs.Viewing a loan
The loan detail page shows:Early settlement
If an employee wants to clear the balance:1
Check the outstanding balance
On the loan detail page.
2
Confirm how interest is treated
Whether early settlement reduces the interest depends on your policy and the loan agreement.
3
Take the payment
Or deduct the balance in full from a single pay run, if the deduction cap allows.
4
Record the settlement
The loan moves to Completed.
When an employee leaves
1
Check the outstanding balance
Before calculating their final pay.
2
Recover what you can from the final payment
Subject to the deduction cap and to employment law on final deductions.
3
Agree repayment for any remainder
In writing, before they leave. Recovering money from a former employee without a written
agreement is difficult.
4
Mark the loan appropriately
Completed if fully recovered; defaulted if not.
Reporting
The loan report shows every loan, its status, its outstanding balance and its repayment progress.Advances versus loans
Use advances for short-term needs and loans for anything larger. Repeated advances by the same
employee usually indicate something a loan would handle better.
Related: Pay elements for the deduction cap, and
Monthly inputs for advances.