Understanding Loss of Pay: How Does It Impact Your Salary and Benefits?

I would like to know about the details for Loss of Pay (LOP). My doubt is how this LOP will reflect in my salary package. Will the LOP be deducted from my basic salary or from my total salary? Will the LOP affect my PF and ESI?

Regards,
Karthikeyan

What exactly is the reason for asking for Loss of Pay (LOP) in your case? There are various reasons involved in giving an employee LOP.

Warm regards,
Umesh Chaudhary
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Dear Umesh, I am inquiring about the basis on which the loss of pay is deducted from the salary. I need a breakdown for the loss of pay.

There may be many occurrences for a loss of pay. It could be due to no leave credit in the employee's account, a fine, unauthorized absence from duty, or regular absenteeism. It could also be due to a loan or an advance from the salary.

In simple terms, if I have to tell you, it's no salary payable for a particular leave taken (No work/No pay). Suppose your gross salary is Rs. 20,000, out of which Rs. 10,000 is your basic pay, Rs. 5,000 as HRA, and Rs. 5,000 as Special Allowance. If you work for 31 days in March, you'll be paid Rs. 18,800 after a deduction from the Provident Fund of Rs. 1,200 (Rs. 10,000 x 12%).

Similarly, if you have no leave balance and you work for 25 days, there would be a salary cut for 6 days on each allowance. Therefore, your basic pay would be (Rs. 10,000 x 25/31) = Rs. 8,065; HRA (Rs. 5,000 x 25/31) = Rs. 4,032; and lastly, special allowance (Rs. 5,000 x 25/31) = Rs. 4,032. Hence, after a deduction of EPF (8,065 x 12% = 968), your salary payable would be Rs. (8,065 + 4,032 + 4,032) - 968 = Rs. 15,161.00.

I hope it's clear to you.

Warm regards,

Umesh Chaudhary
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Understanding Loss of Pay (LOP)

Loss of Pay (LOP) occurs when an employee is absent for one or more days without attending work. LOP is applicable only when an employee has exhausted all accrued leave in the leave roster. Loss of Pay affects only certain components of the salary structure, namely Basic and Dearness Allowance (DA), and not other allowances like HRA, Conveyance, or CCA.

Deductions for Provident Fund (PF) and Employee State Insurance (ESI) are based on the exact amount paid for these two components. Additionally, Professional tax is calculated based on specific slabs.

Regards,
Venkataraman Sundaresan

In continuation of my message on LOP, please note why other components in the salary structure are not affected by a loss of pay. The reason is that the employee must continue to live in the house; hence, there is no deduction on House Rent Allowance (HRA). Whether the employee pays rent to the house owner or resides in their own home, this component remains unaffected.

Similarly, the City Compensatory Allowance (CCA) and Conveyance Allowance are also not impacted by a loss of pay. It's important to understand that the loss of pay does not apply to the total salary. It's crucial to differentiate between the Monthly Total Salary and the Cost to Company (CTC).

If an employee raises concerns with the Labor Department regarding incorrect LOP calculations based on the salary slip, the HR Department may face penalties.

Regards,
Venkataraman Sundaresan

Understanding Loss of Pay (LOP) Calculations

Loss of pay is always computed based on the gross salary level, not on basic + DA. If a person is absent when they have no available leave or when leave is not authorized, why would the company continue to pay a portion of the salary? Referring to the original question, PF and ESIC will be deducted from the salary you receive. Therefore, the deduction will be proportionately less for the amount deducted due to LOP.

Clarification on Loss of Pay (LOP)

Loss of pay does not mean deductions from the salary of a person, such as PF, Professional Tax, ESI, etc. Your doubt on Loss of Pay is misunderstood by others, I observe.

Dear Karthikeyan,

I totally agree with Mr. Umesh; he is right and answered the query in an illustrative manner. LOP has an impact on all salary components as well as on the reimbursement part. So, don't be confused; you will understand it once you have the LOP-impacted salary slip in front of you.

Regards,
Pushkar Bisht