Salary Calculation in India: Should It Be Based on 30 or 31 Days? Seeking Clarity on Legal Standards

Can you please help me by telling me that as per Indian laws, the salary of an employee should be calculated by taking into account 30 or 31 days?

Wage Calculation for Daily-Rated Employees

Wages of daily-rated employees will be calculated based on the number of days worked without reference to the days in the month. The variable Dearness Allowance for daily-rated employees is also calculated according to the number of working days.

Salary Calculation for Monthly-Rated Employees

In contrast, for monthly-rated employees, there will be a monthly salary, and the daily average of the same for any purpose—such as deducting leave without pay—is calculated by dividing the monthly salary by 30, without considering 31 or 28/29 (February). However, for calculating overtime wages, the daily average for determining the hourly rate is calculated by dividing the monthly salary by 26, as it is more beneficial to the employees.

Gratuity and Retrenchment Compensation

Under the Payment of Gratuity Act, the average salary for calculating the gratuity is determined by dividing the monthly salary by 26. When establishing the retrenchment compensation payable under the Industrial Disputes Act, the monthly salary is divided by 30, not by 26.

Therefore, different Acts have provided different treatment concerning the divisor. However, the use of 31 and 28/29 is not common.

Regards,
Madhu.T.K

Depending upon the terms and conditions of the employee, they are classified as daily rated, weekly rated, fortnightly rated, or monthly rated. The calculation of wages is also done accordingly. If your case is related to a monthly-paid employee, then there is no question of 30 or 31 days as you have agreed to pay him a certain amount per month. A month means a calendar month extended from 28 days to 31 days, i.e., the total available days in the particular month. In case of full attendance, he is entitled to get the same monthly wages. However, in case of absence without pay on some working days, deductions may be made on a proportionate basis. For example, if a monthly-rated employee is without pay for 3 days in Feb., Mar., and Apr., then the wages may be calculated as follows: Feb - Monthly rate/28 x 25, Mar - Monthly rate/31 x 28, Apr - Monthly rate/30 x 27.

You may post any particular case in detail if not satisfied.

Regards

Dear All, please tell me if there are leaves without pay or if the salary is deducted as a result of late entry or half days, then how should leaves be deducted along with the monthly salary and on what basis. Is there a particular formula? I am also confused about whether the salary should be computed on the basis of calendar days in a month or the number of working days.

Looking forward to the best possible cost-effective methods.

Thanks & Regards,
Vidhi