How Does a 5-Day Absence Affect Salary Components Like BASIC, PF, and HRA?

Dear Seniors, Firstly, I would like to thank each one of you for providing your valuable suggestions for my posts. I am hoping that you will also offer your guidance on this query. I would like to know how components like BASIC, PF, ESI, and HRA are affected when an employee is absent for 5 days resulting in Loss of Pay (LOP). Do these components change or remain static with only the deduction reflecting LOP in the column?

Please advise me on which of the following calculations is correct:

Calculation 1:

If the Cost to Company (CTC) is Rs. 1,20,000 and the Monthly Gross pay is Rs. 10,000/-
- Basic (50%) = 5,000
- PF (12%) = 600
- HRA (50% of Basic) = 2,500
- ESI (1.75%) = 175
- Conveyance = 1,500 (fixed)
- Other Allowances = 1,000
- Total Earnings = 10,000
- Total Deductions = 2,440
- Net Pay = 7,560

Calculation 2:

If 5 days of LOP is deducted from the Gross pay per month, then it would be Rs. 8,335 (10,000 - 1,665)
- Basic (50%) = 4,168
- PF (12%) = 500
- HRA (50% of Basic) = 2,084
- ESI (1.75%) = 146
- Conveyance = 1,500 (fixed)
- Other Allowances = 583
- Total Earnings = 8,335
- Total Deductions = 646
- Net Pay = 7,689

Please advise me on the correct methodology.

Regards,
Sowmya R

When LOP takes place, you need not show the deductions for the LOP period in a separate column. You can show the number of working days in the payslip. I think number 2 is correct.

Regards,
Pon

Pon is right. LOP is not required to show in Payroll. Your second option is correct.

Dear Pon and Sarkar,

Thank you so much for the suggestions. I would also like to know if an employee's pay is Rs. 16,000 per month and if he is paid for, say, 12 days. In this case, does he fall under the ESI Slab or not? According to ESI applicability, an employee earning <= Rs. 15,000 is eligible, but here I am confused.

I hope you can suggest to me how to proceed with this.

Cheers! Have a good day.

Regards, Sowmya R

The employee is not covered under ESI as he/she is above the threshold limit of 15,000. LOP or any other deductions do not count for determining the applicability of ESI coverage.

If an employee's salary is above ₹16,000/-, then they are not covered under ESI. Due to Loss of Pay (LOP), even if the wages are less than ₹15,000/-, there is no need to be covered under ESI.

Regards

Hi Seniors, Is it correct that the basic salary will be affected because of LOP in a particular month?

Regards,
Jaya