Confused About Salary Calculations After LOP? Need Clarity on Component Basis

Dear All,

In my organization, if an employee has LOP, their gross salary is first calculated after deducting the LOP amount.

For example: As per the offer letter, if an individual's salary is $10,000 and there is an LOP of 2 days:

Gross Salary = $10,000
= $10,000 / 30 * number of days
= $666.66
= $10,000 - $666.66
Net Gross After LOP = $9,333.34

Based on $9,333.34, only other salary components are calculated.

My doubt here is whether the salary components are calculated based on $10,000 or $9,333.34.

Please clarify immediately.

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Whether salary components, PF, and ESI will be calculated based on the gross net salary after deducting LOP. Please send in your views immediately.

Hi,

I'm not sure if I understand the issue completely, but here is what I have to say:

The salary is paid as a lump sum amount on a monthly basis (typically). The net payout to the employee would be 10k - LOP amount (which would reflect on the negative side of the payslip), assuming there are no tax and/or other deductions.

From a tax calculation point of view, the components would be treated in full, meaning there is no impact on the deduction, for example, on HRA, Basic, etc. However, the overall taxable income will be reduced to the extent of LOP deduction.

Hope this helps.

Regards,
Pavel Chopra

Dear Friends,

Can anyone make it clear what Chopra is saying? Which rule has to be followed? Please clarify whether LOP will be deducted from gross or net salary.

Why are two contradictory statements being made here regarding the calculation of LOP? Can anybody just say which one is the correct procedure?

Dear friends,

Salary components will be calculated after deductions only. In the same example, if the person receiving 10,000 has PF and other benefits, all those will be calculated based on the amount (10,000 - LOP amount).

SRI

Dear Umama,

I agree with what SRI and GURU have stated. You only need to consider the Gross-LOP amount to calculate the rest of the components. So, without any hesitation, you can apply the same rule. I hope this is now completely clear for you.

Regards,
Amith R.

Dear friends,

Please refer to the Excel file attached. You only need to change the number of LOP days; the salary components will be calculated accordingly.

A B C

Basic 6000.00 200.00 5800.00
HRA 2400.00 80.00 2320.00
Conveyance 1400.00 46.67 1353.33
Education 200.00 6.67 193.33
10000.00 333.33 9666.67

The division of per month salary by the number of days, whether standard 30 days or the number of days in a month (31, 30, 28), depends on the policy of the company. For all the statutory deductions, the basis will be column "C."

Hi,

The salary calculations have to be like this:

Suppose for a 10k gross salary (for 30 days), you have a breakdown of the salary as follows:
- Basic: 4000
- HRA: 2000
- SA: 3000
- Conveyance & mobile allowance: 1000

Then, for two days, the loss of pay should be calculated as:
Loss of pay (Sum of the below-mentioned components)
- Basic loss of pay: (4000/30) * 2
- HRA: (2000/30) * 2
- SA: (3000/30) * 2
- Conveyance & mobile allowance: (1000/30) * 2

I hope this clarifies all your doubts.

Thanks,
Barada