Payroll Confusion: Should Salary Reflect Days Worked or Leaves Taken?

Hi all, I'm a budding HR generalist. I'm placing my doubts regarding payroll here. Kindly help me with facts.

Salary Calculation: Days Worked vs. Leaves Taken

1. Should salary be calculated based on the number of days worked or the number of leaves taken? Both have differences according to my calculation.

Calculating Daily Salary in 31-Day Months

2. How should the salary per day be calculated during months having 31 days?

Regards.

In view of your above question, when an employee is deployed, their salary is calculated on a monthly basis. We divide the monthly gross salary by 30 days (30 days as we also pay for the weekly offs in the month, deducting one day as the month is calculated for 30 days). In the case of daily wages, the weekly offs are not counted, and payment is only made for 26 days.

Salary Calculation Method

So, we calculate as follows: Salary per month (Gross) / 30 days in a month x No. of days present.

Example: 5000 / 30 * 25 = 4166.

Monthly salary = 5000 * 25 / 30 = 4166 (same as above).

Regards

In Sharmila's case, if I take 1 day leave in a month of 31 days and I am present for 30 days, then my pay will be $5000/30*30 = $5000, meaning no loss of pay.

Methods of Salary Calculation

As per my knowledge, there are two methods: one is payment for actual attendance, and the other is deduction of LOP from the gross.

First Method: Payment for Actual Attendance

Salary / number of days in the month * total present days (including week-offs). Assume I took two days leave in a month of 31 days: $5000/31*29 = $4677. Assume I took two days leave in a month of 30 days: $5000/30*29 = $4833.

Second Method: Deduction of LOP from Gross

If my pay is $5000, then taking the base of 30 days, my LOP per day is calculated, i.e., $5000/30 = $166.7 or $168. So, as per method II, my LOP per day is $168. In a month, if I am absent for 2 days, my LOP will be $336, and my eligible pay will be $4664.

Method one is beneficial to the employee, whereas method II is beneficial to the employer. If I am wrong, kindly explain with examples which method you follow.

I faced the same problem that you have explained, and I followed the second method. I just want to make sure if that's the correct method in practice.

In February, there are 29 days, and during a leap year, it is 28 days. So, the calculations can be: gross salary divided by days in the month multiplied by the present days (including Sundays and official holidays) minus leaves (per hour/per day basis).

There are 7 31-day months in a calendar year, with 4 30-day months and one 29-day month. Cheating someone's money is not justified. Even not paying Rs. 1 to a deserving person is nothing but stealing.

Please, can anyone tell me how we can give a salary increment to our employees without affecting their basic salary? How is this possible?

Salary Calculation Method

Since there are 12 months and 365 days in a year (not a leap year), the salary per month is 25,000 (twenty-five thousand). Calculating the salary per year would be Salary per Month * 12 months, which is 25,000 * 12 = 300,000 (yearly salary is 3 lacs). To determine the salary per day, the yearly salary is divided by the number of days in that year, so 300,000 / 365 = 821.91 (thus, the salary shall be 821.91 per day).

I believe this is the most accurate concept for calculation, as there are no issues with varying month lengths or leap years, and the salary is being divided by all days in a year, including national holidays and Sundays. This way, both the employee and employer are treated equally. I personally use this same method. Kindly let me know if I am wrong.

Dear All, I have read all the above conversation. Actually, I am looking into a project where employees are allowed to take Sundays off. If I apply the above-mentioned methods in a case where an employee was present for only 1 day, then I am paying him for 5 days. For example, his gross monthly salary is Rs 26,000.

Let's assume he took 25 days of leave in a month of 30 days: 26,000/30*(30-25)= 4,333

So, I think this method is not applicable when employees are allowed to have Sundays off without any deduction from salary. My problem is that my boss asks me to divide the monthly salary by the number of days in a month and accommodate Sundays as well.

I want to have a formula where I can divide the salary by the number of days in a month (without deducting for Sundays) and not pay extra money when an employee is present for only a few days. Kindly shed some light on this.

Salary Calculation for Sundays

Moreover, to accommodate Sundays, we have to divide the total salary by the total number of days in the month minus Sundays. For example, 26,000/31-5=1,000 per day salary. Now, if an employee takes 1 leave, we will pay them 25,000 salary, and so on. The employee calculates their per day salary as (26,000/31 = 839) and may ask why we have deducted 1,000 instead of 839. How can we avoid this confusion?

What I think is that we have to guide them that since we are not deducting their salary for Sundays off, we only consider workdays (Month days - Sundays). This amounts to 26 days; hence, the total salary would be divided by workdays to accommodate Sundays.

Overtime Calculation for Sundays

If we ask them to work on Sundays, we pay them overtime for the hours they worked. Now, the question arises, what would be the per-hour wage rate here, keeping in view the above scenario. (The employee works an 8-hour shift daily.) Will it be 26,000/31/8*hours worked OR 26,000/26/8*hours worked?