Loans, advances and exits, closed clean.

How most Indian schools track staff loans today

The accountant keeps a small notebook in the bottom drawer of the office desk. Inside it, in pen, are 14 active staff loans — some festival advances of ₹10,000, some bigger personal loans of ₹75,000 disbursed last year. Each entry has a name, an amount, a tentative monthly EMI and a column with checkmarks for the months EMI was deducted. By the time the accountant is in her fifth year on the job, the notebook has 90 entries and three are entirely illegible.

When a teacher resigns mid-year, the principal asks 'how much loan does she still owe?' and the accountant flips back through the notebook for ten minutes. Often a small sum is forgiven because the entries do not tally. When a long-serving teacher retires after 22 years, the gratuity calculation is done on a calculator, the leave encashment is done from a leave register, and the final settlement is paid as a single round figure that nobody can later defend in front of an auditor or a Labour Department inspector.

None of this is dishonesty. It is a tooling gap. Loans, advances, gratuity and full-and-final settlement need a real ledger that lives inside payroll — not a notebook that lives in a drawer. The Employee Payroll module ties all four together, because they all pull from the same employee, the same salary structure and the same locked pay periods.

How loans and advances work in Inkwelly

A loan or advance in Inkwelly is created against an employee, with a clean amount, an interest rate (often zero for staff welfare loans), an EMI amount, an EMI start month, and an end condition (number of EMIs OR final balance). When the loan is approved, the disbursement amount can either be released through the next pay run as a one-off positive line item, or the school can pay it externally and mark it as 'disbursed outside payroll'.

From the next pay period, the EMI auto-appears as a deduction line on the employee's payslip, with a clear reference to the loan ID and the running balance. The teacher sees the loan ledger in the employee portal — disbursed amount, EMIs deducted to date, current outstanding, projected end month. No ambiguity. The accountant cannot 'forget' an EMI because the system applies it on every pay run until the balance hits zero.

Festival advances, salary advances and welfare loans are all the same primitive in Inkwelly — the school sets a 'Type' (Festival, Salary Advance, Personal, Education) so the report can be filtered by purpose, but the deduction logic is identical. A festival advance is just a one-EMI loan; a personal loan is a 24-EMI loan. Both run through the same engine.

From advance request to closure

How full and final settlement works

When a teacher resigns or is terminated, the school owes a clean computation: salary for days worked in the last month, leave encashment for unused earned leaves, gratuity if the employee has completed 5 years of continuous service, bonus accrual for the part of the year worked, MINUS any outstanding loan balance, advance recovery, notice-period shortfall, and pending statutory deductions (TDS, EPF, ESI, PT) for the final month.

In Inkwelly, this entire computation lives on a single page. The accountant clicks 'Initiate Full and Final' on the employee profile, picks the last working day, and the system pulls every relevant figure: pro-rated final salary from the locked attendance, leave balance from the Employee Attendance module, gratuity computed under the Payment of Gratuity Act formula (15 days basic salary for every completed year of service, with the 26-day month convention), bonus accrual from the year-to-date locked pay runs, every outstanding loan balance from the loans ledger, and every statutory deduction recomputed against the final month.

The accountant reviews each line, can override a value with an explicit reason (rare — Inkwelly tries hard to compute every piece correctly), and generates the FNF statement — a single PDF on school letterhead, signed by the principal and counter-signed by the teacher, with every component itemised. The net amount is paid via the same bank advice flow that handles regular salaries. The teacher's UAN is marked as exited in the next ECR. Form 16 is generated for the year up to the exit date. The audit log captures every step.

Real-world cases this fixes

The retiring senior teacher. A senior teacher retires after 28 years at the school. Without Inkwelly, gratuity, leave encashment and PF withdrawal are computed by the accountant on a calculator, copied into a Word document, and signed off in 10 days. With Inkwelly, the FNF statement is ready the day the resignation is accepted — every component shown with the formula and the source data link — and the teacher leaves with full closure on the same date.

The mid-year resignation. A teacher resigns in November. She has a ₹45,000 personal loan with ₹21,000 outstanding, 18 unused earned leaves, and her notice period is one month short. The FNF page computes salary for November (locked attendance), leave encashment for 18 days at her basic+DA rate, recovers ₹21,000 against the loan, recovers one month's notice shortfall, deducts TDS on the net, and shows a positive net payable. Total time: 8 minutes. No ambiguity in any number.

The festival advance recovery. Twelve teachers received ₹10,000 each as a Diwali advance in October. Each has a 1-EMI loan that auto-deducts in November's pay run. Without Inkwelly, the accountant maintains a separate ledger and forgets one teacher's recovery in the rush; that recovery now goes uncollected. With Inkwelly, every advance is on the loans page, every EMI is auto-applied, and the principal sees a 'no advances outstanding' confirmation on the December dashboard.

The notice-period buyout. A teacher resigns and the school waives her one-month notice period in exchange for a smooth handover. Inkwelly's FNF page lets the accountant add a 'Notice Buyout (employer-paid)' positive line, with a typed reason. The line shows on the FNF statement, is paid as part of the net payable, and is captured in the audit log — visible in any future Labour Department inspection.

Run a Full & Final on a real exit — in your demo

Bring details of any one resigning or retired teacher (with permission), and we will compute the entire FNF statement during the call — gratuity, leave encashment, loan recovery, TDS — to the rupee.

Limits, audit and small print

Loans and advances follow the school's policy on maximum loan amount as a multiple of monthly basic — a school-level setting (commonly 3x or 6x basic). Inkwelly does not block loans above the limit; it warns the accountant and requires an explicit override with reason. Interest rate is per loan and can be zero (typical for welfare loans) or any positive number; if non-zero, Inkwelly computes interest on declining balance and includes it in EMI breakdown.

Gratuity is computed strictly per Section 4 of the Payment of Gratuity Act — the formula, the 26-day month, the 15-days-per-completed-year, and the ₹20 lakh cap. Schools that have a higher gratuity policy (sometimes 30 days per year for senior staff) configure the policy at the structure level; Inkwelly applies whichever is more favourable to the employee, with a clear note on the FNF showing both. Leave encashment uses the school's policy rate — most schools use basic + DA per day, but some use full gross; both are supported.

FNF statements are stored as immutable PDFs on Mumbai servers, retained for seven years (the Labour Department audit window). Once an FNF is signed by both the principal and the teacher, it cannot be edited — only superseded with a new signed version that explicitly references the previous one. The teacher receives the FNF PDF over email and inside the employee portal; UAN passbook closure, EPS withdrawal forms (if eligible), and the final Form 16 are all linked from the same FNF page. There is no separate exit register that needs to be maintained outside Inkwelly.