Payroll Dilemma: Is Crediting Salary for Only 25 Days a Problem?

Dear Seniors, please let me know if there is any problem with crediting the monthly salary for only 25 days. We have planned to change the salary period from the 26th to the 25th. Therefore, in the initial month, we are supposed to do this. Please advise me.

You can change your salary period to the 26th to the next 25th. However, to change your system of payment, you cannot pay 25 days' salary to the employees. According to labor laws, an employee should be paid for working the whole month. The law does not specify the evaluation of the month but requires payment for 30 or 31 days.

Therefore, it is advisable to pay 5 days in advance to all employees. By doing this, you will easily be able to change your system while also complying with the law.

Hope this information helps you. Cheers.

Actually, a few things are not clear to me from your post. However, at a glance, I would like to advise you that it's better to document the policy first. Giving 25 days' salary will not be an issue in my view, as you are all starting a new system, and this will only be for the first month.

Employee Salary Concerns

The main problem lies with employees who will not receive a salary for one month (30 days). In that case, 5 days' salary will be less, and for junior staff, even one day's pay matters. Therefore, it is always better to take the employees into confidence and inform them in advance so that there will be no dissatisfaction after receiving their salary.

I hope a few things are clearer to you.

Best regards,
Regards

You can maintain salary timings from the 26th to the 25th of every month. The only thing is you have to give the last 5 days' salary every month on a prorated basis. If anybody has joined or left the company, you have to calculate attendance carefully. If anybody has taken leave during these last 5 days, you have to deduct the leaves the following month. Please maintain the leave track record carefully.

Regards,
Ambetkar

I agree with Mr. Bhuwan. The only thing I want to add here is that while calculating leaves on Prodata, you have to be very careful and maintain the records properly. If your payroll is software-based, then the IT person needs to modify the program in the software. If you are maintaining it manually, then every month you have to check the attendance. Especially when you have to do the full and final settlement of the employee, keep in mind how many days' salary need to be paid. All the very best!

Regards

Thank you for your message. It seems there are some issues regarding the salary period and payment of wages within 7 days of the month's last date. Additionally, there is a concern about dealing with ESI and PF as government authorities record the month from the 1st to the 30th/31st, not according to the salary month.

If you pay advances for the remaining days, you can pay the salary by the 7th of the next month. However, by doing so, you are also paying advance ESI/PF. If an employee is on ESI leave during those days, they will not receive benefits from ESI as online records will show payment by the company for those days. In reality, the deductions will be made the following month.

It is crucial to be aware of this issue as we are currently facing the same situation. Therefore, we are contemplating reverting to the old practice of paying the full month's salary.

Thank you for bringing this to our attention.

Best regards

May we know the objective of your proposal? More suggestions could be provided if we are informed of the objective. Was there a specific request from the employees, or does the HR department wish to ensure timely payment to the employees?

As suggested by members, there are many factors to consider, such as leave accounting, statutory compliance, and the care needed when effecting full and final settlements, etc.

Regards,
M.V. Kannan

Objective of Salary Crediting

The objective of this is to credit the salary by the last working day of every month. Additionally, there should be some amount in the hands of the management because only then will the employees also have some responsibilities when leaving the organization and if we make any changes during their employment. Otherwise, by the time they wish to leave the company, they will move out as they wish.

Thank you, Seniors.

Regards,
Selvam.

Your objective to credit the salary on the last working day of the month is fine. However, your statement that the management must have some amount in hand so that employees do not quit as they wish can always be addressed in the following manner.

You can still credit the salary of employees on or before the 5th of every month and have a hold on the wages for 5 days from the 1st to the 5th of the month.

In addition to this, you have payments such as leave encashment, LTA if applicable, and Medical reimbursement if applicable in the hands of the management. These can always be adjusted against notice pay if employees quit the organization. However, it all depends on the salary structure and the notice period. The higher the wages and the longer the notice period, the possibility of recovery diminishes.

In my opinion, you may be increasing your workload by keeping track of the last 5 working days of the month.

Regards,
M.V. Kannan

Give them their full 30 days' salary, i.e., 5 days' salary in advance. You can adjust their leave during these 5 days, deducting it from the salary of the following month.

Understanding Monthly Salary Payments

In my view, the monthly salary means the payment of minimum wages for contract labor or regular employees as specified for 30 days. It may be paid on the 7th or 10th day in the succeeding or preceding month. The payment of statutory amounts is fixed regardless of the organizational payment mode of salaries.

The financial year is from April 1st to March 31st, while the calendar year is from January 1st to December 31st. The last date for ESI payment is the 20th of every month, and PF contributions are due on the 15th of every month. Keeping this situation in mind, every company needs to evaluate its procedures to avoid confusion in the calculation of wages or other matters.

Regards