Payroll Calculations: How Do You Determine the Right Number of Days?

Dear HR Friends,

I would like to know about payroll calculations or what the common standards of payroll calculations are.

Few Queries:

1) Should it be calculated based on 26 days (Sundays excluded) or
2) On 31 or 30 days

Please help.

Sweta

Hi,

Please help me with the same matter. I would like to clear my concepts on this subject.

Thank you,
Pratibha

Hi Shewta,

Normally, it is 30 or 31 days with 4 paid Sundays. It depends on the company policy what they want to consider. It has to be 31 and 30 days.

Suresh Sharma

Hi Shweta,

I agree with Suresh. It depends on company policy, but it has to be 30 or 31 days, normally 30 days.

Neha

Dear Friend,

As I understand, it is calculated based on 26 days under the Minimum Wages Act of 1948.

Regards,
S. Achuthananda

Dear Sweta,

Payroll generation depends entirely on the number of days in a month. For example, in February (28 days), you will pay the total salary package accordingly. However, when deducting a Leave Without Pay (LWP), it should be calculated based on 28 days. Therefore, it is independent of the number of holidays, etc.

Please let me know if you have any specific queries regarding the calculation of Payroll.

Regards,
Vishal Rana

Hi,

Yes, you are right, but the number of hours a person has to work is 48 hours in a week. So, based on the hours, a person would be working for 26 days and not 31 or 30 days. Basically, it is the policy of the company that would define the pay for the number of days worked. Moreover, most companies, in order to provide benefits to employees, calculate salary based on 30 or 31 days, as the deduction in salary for absences and unpaid leave will be based on 30 or 31 days of working, including four paid Sundays.

Suresh Sharma

For salaried personnel, an average day rate can be calculated as follows: 325.25/12 = 30.44. Salary/30.44.

Now, let's consider a scenario where 27 days are to be paid in February. The calculation would be: [Salary] - ([Salary]/30.44)*1 (days not paid).

Similarly, if one day is to be paid in December, the calculation would be: [Salary] - ([Salary]/30.44)*30 (days not paid).

Dear All,

There is a lot of interpretation on the salary calculations. In the above case, if the payroll is run for the number of days in the month, the following illustration will be found to be incorrect.

For example, one month's salary for Mr. X is 6000 (Basic - 4000 + DA 2000). The salary for 31 days in Jan will be 6000 (6000/31*31 days), and his PF will be 6000/31*31 X 12% = 720 (i.e., per day PF will be 23.23).

But in the month of Feb, his salary will be 6000 (6000/28*28 days attended), and his PF will be 6000/28*28 x 12% = 720 (i.e., per day PF will be 25.71).

Now, check the PF contribution of Jan & Feb, the PF wages have increased. If the salary is fixed, the PF contribution should also be the same. This difference will create a lot of problems in PF inspection.

So, as stated by The Industrial Employment (Standing Orders) Act, 1946 (Ref. model Standing Order), the salary should be calculated on 30 days for Monthly rated employees and 26 days for daily rated employees, to maintain the constant PF deductions & LOP of an employee.

Any further interpretation is welcomed.

Regards,

Suresh Ramalingam

Consultant - Compliance

It should be 30/31 days only because when you hire a person, you tell them the total package. For example, 1 lakh per annum, which includes Sundays as well.

Sanjay Mistry

Dear all,

As per government norms, 26 days are calculated for salary in every month. There is no partiality to the workers, whether skilled, semi-skilled, or in clerical roles; the rule is applicable to all. However, some private concerns follow 30 or 31 days for their own benefit.

To be clear, 26 days are considered the salary calculation period.

Regards,
Arumugam. N

Hi,

One must always calculate 30 or 31 days for calculations. In such a competitive world, money is an important factor for retention, so I would advise you to calculate 30 or 31 days. Most companies are also following the same approach.

Regards,

Suresh is correct, it is 30 days regardless of Sundays and holidays for monthly wages and 26 days for daily wages.

Regards,
Paul

I would like to add that for a full-time salaried employee, most organizations use the term CTC (Cost-to-company) these days when deciding on the package. Does this CTC include the PF contribution from the employer's side also?

So effectively, the employee will get Salary = CTC - PF contribution. Is this correct?

VIJAY

Hi Suresh,

I have seen your comments about salary calculation where I have some doubts. As per my understanding, PF is 12% of the basic salary, where you have mentioned 4000/- Rs. as the basic salary. Now, based on this, his PF will be 480/- Rs. per month.

In the calculation provided below, I don't understand. Please help me out.

His PF will be 6000/31 * 31 X 12% = 720 (i.e. per day PF will be 23.23).

I may be wrong, so please update me on this.

Waiting for your kind reply.

Kind regards,
Rupendra Mehta

Dear all,

As per government norms, 26 days are calculated for salary in every month. There is no partiality to the workers, whether skilled, semi-skilled, or clerical; the rule applies to all. However, some private companies choose to follow a 30 or 31-day calculation for their own benefit.

It is important to note that the salary calculation period is based on 26 days.

Regards,
Arumugam. N

Hi all,

It is quite clear that the salary calculation is based on 26 days.

Regards,
Arun K Mishra

Hi Suresh,

From your post, it is clear that pay calculation needs to be made for 30 days. Now, I have two queries:

1) What about February, which has 28 days?
2) Every company follows its own payroll period of 30 days / 31 days so that the salary of the employees is credited by the month-end. Taking an example from my company, we follow a payroll period between the 28th of the previous month and the 27th of the current month for pay calculation of the current month (31 days). Therefore, every month it will vary between 30 days, 31 days, and 28 days, and the employees receive their salary by the end of the current month. In this case, how can the calculation based on 30 days be applied?

Kindly provide a solution for these two queries. Please also send a copy of your reply to my email address - richrachna@gmail.com.

Regards,
Rachna Sinha

I think Suresh Ramalingam is correct. That was how it was explained to me by my Senior Accounts Manager.

Hi All,

I have seen and read all the discussions here, and there is still a lot of confusion about salary calculation day. In my experience and knowledge, I always recommend going for a 30-day calculation as it is better and easier to maintain. However, I am aware that it can vary from company to company.

Thanks and Kind Regards,
Rupendra :)

Hi all,

As per my knowledge, we commit to the employees based on their annual salary (e.g., 2 lakhs per annum). The variation in the number of days in a month will not affect the monthly salary because when we refer to the monthly salary, we divide or multiply the salary by the same number of days. For example, for February: 16600/28 * 28 = 16600, and for March: 16600/31 * 31 = 16600.

When we divide the salary by the number of days in a month, we need to calculate the number of present days for that specific number of days in a month.

Regards,
Annapurna.N

Hi, if the number of working days in a month is 18, how do we calculate the salary? For salary calculation, should we consider the basic or gross salary?

You should consider the actual number of days as per the calendar month for the first month's pay calculation. Please find attached a short note illustrating the problem in using a fixed number of days (such as 30 or 31 for pay calculation).

The same logic applies for the calculation of last month's pay when an employee leaves an organization in the middle of a month.

T E Gautham
Tandem Integrated Business Solutions

It should depend on the month, with 30 or 31 days only. If you need to calculate attendance, you have to finalize the number of days for each month and the payment due date.

Regards,
Rajendra

Hi,

I'm in full agreement with Mr. Sanjay Mistry because we should take the entire month's days into consideration. Firstly, it's based on the attendance cycle of the organization. The ideal calculation would be:

Total number of days in a month - Unpaid days = Paid days

Let me know if further information is required on the same.

Regards,
Mithun Gupta

Dear All,

In our company, I calculated the payroll based on the total days in the month. For example, Mr. XYZ worked for 30 days in Nov-09, so the salary will be calculated as follows:
10000/30*30 = 10000

If they worked for 28 days in the same month, the calculation will be:
10000/30*28 = 9333

I am following this method in our company. Please suggest if this is correct or not.

Thank you.

Dear All,

In our company, I calculated the payroll based on the total days in the month. For example, Mr. XYZ worked for 30 days in Nov-09, so the salary will be calculated as follows:
10000/30 * 30 = 10000

Similarly, if they worked for 28 days in the same month, the calculation would be:
10000/30 * 28 = 9333

I am following this method in our company. Could you please confirm if this calculation is correct or suggest any improvements?

Thank you,
masadijaz

Hello Friends,

Sunday will be excluded or included in the payroll calculation. Please give me the details.

Saurabh Shrivastava

Dear Swetha,

Payroll calculation depends on the monthly total days, for example, January has 31 days, February has 28 days, March has 31 days, and so on. You should combine both working days and weekends to calculate it.

Regards,
Charvaka Reddy

Hi Swetha,

According to minimum wages, we have to pay for 26 days. Otherwise, we have differences every month, such as 30, 31, or in February 28 days. So, 26 days is common and easier to work out, better than 30 or 31.

Regards, Bharath S.R

Dear All,

Thank you very much for your really useful information.

I am struggling with some salary issues for my employees. I am currently working on a consultancy with a restaurant that employs more than 20 people without having received any offer letter, contract, PF, ESI, etc. Absolutely nothing.

Being an HR professional, the first thing that strikes me (and this is a must-know for all entrepreneurs) is that the moment you have more than 20 people in your company, you must comply with PF or ESI regulations. If you are below 20 employees, compliance is not mandatory.

Furthermore, no specific rules are in place for calculating the monthly salary. The accountant is calculating the salary based on the number of days worked, which I do not understand.

In my own company, I used to calculate the salary and deduct the days taken if they exceeded the monthly quota of days off. For example, I used to provide 22 days of leave per year plus government holidays. I calculated a monthly leave ratio (22/12) to track each employee's balance, ensuring full salary until they exceeded their leave quota. After that, I calculated the cost of a workday (based on 22 working days: 30 days - 8 days weekend) to deduct leave accordingly.

After reading your discussions, I feel like I may have been mistaken. Can you enlighten me on this? I feel a little lost...

My main question is: for this restaurant, how many days should I use to calculate the salary? We work from Tuesday to Sunday, with Monday off. Should I calculate based on a 31-day month or a 27-day month (31 days - 4 Mondays)?

Thank you for your help. I apologize for the lengthy message.

Camille

Yeah, I agree with Suresh Ramalingam... Salary should be calculated for 30 or 31 days a month, including all paid holidays and Sundays, excluding LOP days.

If I am wrong, please let me know.

Hi friends,

I want to understand the full payroll process. Could you please provide details on the particulars included in the payroll system and the corresponding formulas? Your assistance in this matter would be greatly appreciated.

Thanks and regards,
Jothi M

Swetha, you can pay 26 days of salary for your employees without any issue from the labor department. However, your company has a policy that states if they are paying an amount for the weekly rest day, then you should pay for 30 days only. So, first, check your company's policy and then decide whether to pay for 26 days or for 30 days.

Thank you.

Payroll Period and Salary Calculations

Generally, in a payroll period, we consider 30 days for salary calculations. For instance:

- If there are 31 days, we consider 30 days with 4 week offs ((31-4)26+4=30).
- If there are 30 days, we consider 30 days with 4 week offs ((30-4)26+4=30).
- If there are 28 days, we consider 30 days with 4 week offs ((28-4)26+4=30).

However, if there are any instances of Loss of Pay (LOP) or absences, deductions can be made accordingly. This practice is applicable even in the IT industry, despite employees working 22 days (including Saturdays and Sundays, totaling 8 days).

Regards,
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