How Can Employees in Karnataka Request Salary Advances? Seeking HR Insights

Hey, I am Soniya, working as an HR Executive. I'm creating a policy on advances against salary. Could you please let me know how an employee can take an advance against salary according to the Karnataka government rules?

There is no notification from the government. It is purely an internal policy. As per the Payment of Wages Act, any person covered under the POW Act, all the deductions put together shall not exceed 50% of the monthly gross.

Hi, in general, employees will be extended the facility of a festival advance, which is interest-free and will be deducted in 10 equal installments. Salary advances are normally given in exigency cases, such as a serious illness or death, to meet immediate commitments, and the same will be deducted when the salary is disbursed.

Dear Soniya,

In Karnataka, the rules regarding advances against salary are generally governed by the Karnataka Shops and Commercial Establishments Act, 1961, and other relevant labor laws. While specific rules can vary depending on the organization, here are some general guidelines and practices:

General Guidelines:

Eligibility:

Employees may need to have completed a certain period of service to be eligible for an advance (e.g., six months to one year).

Purpose:

Advances are typically granted for specific purposes such as medical emergencies, education, marriage, or other urgent needs.

Amount:

The maximum amount of advance may be capped (e.g., up to one or two months' salary).

Repayment:

The advance is usually recovered in installments from future salaries. The number of installments and the percentage deducted from the salary can be predefined (e.g., 10-20% of the salary per month).

Approval Process:

A formal application process is required where the employee needs to submit a written request. Approval from higher management or the HR department is typically necessary.

Karnataka Shops and Commercial Establishments Act, 1961:

The Act may not specify detailed provisions about salary advances, but it ensures that wages are paid timely and without unauthorized deductions. Here are some relevant points:

Payment of Wages:

Wages must be paid on time and without unauthorized deductions. Any advance payment arrangement should ensure compliance with this principle.

Deductions:

Any deductions from wages, including for the repayment of advances, must be authorized and comply with applicable laws.

Record-Keeping:

Employers must maintain accurate records of advances and repayments.

Recommendations for Policy:

- Clear Eligibility Criteria: Define who can apply for an advance and under what conditions.
- Application Process: Outline the steps for applying, including necessary documentation and approval hierarchy.
- Advance Limit: Specify the maximum amount that can be taken as an advance.
- Repayment Terms: Clearly state the repayment schedule and terms, including the number of installments and deduction limits.
- Confidentiality and Fairness: Ensure the process is transparent and fair, maintaining confidentiality of the requests.
- Compliance: Ensure that the policy complies with all relevant laws and regulations.

It is advisable to consult with a legal expert or the Labour Department for the most up-to-date and specific regulations regarding advances against salary in Karnataka.

Thanks

Dear Member, please discuss the matter with your management regarding the Salary Advance Policy. The government has no role in the payment of advances to employees employed in private companies.

Salary Advances: Legal Obligations and Practices

An employer is not legally bound to give salary advances to employees. However, if an employer does lend a salary advance to one employee, they are bound to fulfill the request of other employees as well. There cannot be discrimination on any basis. Mostly, it's a localized practice, occurring a maximum of once a year. It is mentioned in the bi-partite settlement/agreement with the union. In some industries/establishments, festival advances are in vogue, deductible in a maximum of 10 or 11 EMIs but interest-free. These are normally linked to a festival season like Deepavali. The recovery towards these advances is permissible but within the overall limit of 50% of the gross salary. The unrecovered balances can also be recovered from FnF settlements (other than gratuity payment). Repayable advances are admissible under EPF rules but only wherever EPF-exempted Trusts are in operation.

EPF Withdrawals: Conditions and Permissibility

Other than this, Part-Final withdrawals are permissible under the EPF Act (non-refundable) as follows: https://www.epfindia.gov.in/site_en/FAQ.php:

1. Medical Emergency for member/spouse/parent/children/Any PF member: Lesser of the employee’s share plus interest or 6 times the monthly salary (Basic + DA).
2. Construction/Purchase of New House: Employee must have served a minimum of 5 years/90% of the PF Balance.
3. Renovation of House: Can be withdrawn after 5 years from the construction of the house/12 times the employee’s monthly salary.
4. Repayment of Home Loan: Employee must have served for a minimum of 3 years/90% of the PF Balance.
5. Wedding of member/sibling/children: Employee must have served for a minimum of 7 years/50% of the employee’s share plus interest.

Advances in Small and Medium Establishments

However, in small offices, micro, medium, small-scale establishments, and in unorganized sectors, salary loans and/or advances are common. Sometimes these offices authorize need-based payment of salary in advance (a few days prior to the normal date of salary disbursement, usually before the 7th of a month) in exigencies. Similarly, advances are being paid as per the practices followed, say repayable in a few installments. These temporary measures are in vogue considering the fact that these units are small, and the HODs/COO, or owners must know their employees individually and will be aware of things domestically as well. Therefore, this financial assistance at times of need is possible.

There is no such rule to pay monetary advances to employees by the establishment; still, establishments pay advances to employees as welfare measures on a case-by-case basis. Every establishment keeps a provision, but it is not compulsory on the part of the employee; the management grants an advance when they are sure that the money lent can be recovered with ease.

For example, a new employee (earning a 60K monthly salary) who has already been on the job for 20 days but needs 10-15K immediately from the company to meet an exigency. There is nothing wrong with paying that amount because the employee already has more money in their account than the requested amount.