Confused About Loss of Pay Deductions? Need Help with Salary Calculations for November!

I have a few doubts regarding the calculation of salary with "Loss of Pay."

Questions on Loss of Pay Calculation

1. Should the LOP be deducted from the Basic Pay, Gross Pay, or (Gross Pay + Liabilities)?
2. Will the PF and ESI be paid for the entire month or the exact number of days worked?

Can anyone clarify the calculations with an example of 2 days LOP for the month of November (30 working days)?

Thank you.

Regards

The loss of pay should be calculated from the gross salary. After that, you can start the deductions, such as ESIC, PF, PT, and TDS.

As per the Minimum Wages Act, to arrive at daily rates of wages, the monthly wages shall be divided by 26. To arrive at monthly rates of wages, the daily rate of wages shall be multiplied by 30, irrespective of the number of days in a month.

Illustration:

Let the salary of X be Rs. 5,200.00 (salary components are basic and DA only) per month.

Now,

- Fixed Salary: Rs. 5,200.00
- LoP: 2 Days
- LoP Salary: Rs. 400.00 (Rs. 5200.00/26 * 2)
- Eligible Salary: Rs. 4,800.00 (Rs. 5200.00 - Rs. 400.00)
- Less - EPF: Rs. 576.00 (Rs. 4800.00 * 12%; NCP Days will be 2 Days)
- Less - ESI: Rs. 84.00 (Rs. 4800.00 * 1.75%; Worked Days will be 30 - 4 Sundays - 2 LoP = 24 Days)

Now you may apply the above in your case. Please correct me if I am wrong.

Dear Srinath,

Replying to your 1st query: LOP is deducted from the gross pay only (which excludes any incentives or bonuses).

2nd query: In case of 1-2 LOPs, the EPF is paid for the whole month, but if they are more (10-15), then PF can be deducted as very aptly elaborated by Mr. Mohan. Technically, PF gets deducted, but it usually does not make a difference until the basic is below INR 6500/-. If the basic is below the mentioned amount, then you can deduct the PF day-wise.

For ESIC, I am not very sure. You can go to the ESIC website, and when you fill the form there, just fill in the required columns. The form will calculate all things itself. All you need to do is fetch data. As per that, I am not sure if anything is deducted for LOPs.

But I am very certain that holidays and Sundays are not deducted, neither from ESIC nor EPF.

Example

CTC: 1.8 LPA

Monthly: 15000/- PM

No. of Working days (Say, November): 30 days

LOP: 2

Hence, paid days: 30-2 = 28

EPF: 12% of Basic {MIN(6500, Basic)} (Deduction not required usually)

ESIC: It's self-calculating if you go into your ESIC account.

Wishes,

Axita

Calculation of 1 Day's Salary for Various Scenarios

If to arrive at 1 day's Loss of Pay (LOP) salary, the monthly salary is divided by 26, the same logic should be applied for calculating 1 day salary for:

- a. Leave encashment
- b. Retrenchment
- c. Lay off
- d. Closure
- e. Voluntary Retirement Scheme (VRS), etc.

As per the General Clauses Act, one month means 30 days. It is better to follow it unless otherwise specified in relevant statutes, like the Payment of Gratuity Act.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

Dear Axita, I am of the view that Sundays and declared holidays should not be considered as working days in the case of ESI. This is because if one works on those days, they would receive double wages for that day over and above the fixed monthly salary.

Let us assume that a month of 30 calendar days contains 4 Sundays, and one is drawing a salary of Rs.5,200.00 per month. If they do not work on any Sundays and have no loss of pay, their salary will be Rs.5,200.00. If they work on any one Sunday, they will receive Rs.400.00 as salary for that day along with the fixed salary of Rs.5,200.00. Now, they would have worked for 27 (30-4+1) days, and hence for ESI, the number of days worked will be 27.

So, applying the above logic in the case of Mr. Srinath Manam, the salary on which ESI is payable will be Rs.4,800.00 (Rs.5,200.00 - Rs.5,200.00/26*2), and the number of days worked will be 24 (30-4-2) days.

Please note that payable wages and the number of days worked are to be given as inputs while making returns online.