Salary Deductions for Unpaid Absence: Should We Include HRA and Allowances?

Dear Team Members,

Please advise me on the following scenario: if an employee is absent without pay for a day, should we deduct one day's salary? Should we only deduct the proportionate rate from their basic salary component, or do we also need to deduct the proportionate components like HRA and City Compensatory Allowances? Currently, when we cash out their leave encashment in December, we calculate it based only on the basic salary component. This means we are not factoring in other components like HRA and City Compensatory Allowances, even though these are part of their Gross Salary Components.

Regards,
Krishnendu Mukherjee

Dear Sir,

If any employee experiences a loss of pay salary for some days in any month, then all components of the salary would be deducted at a proportionate rate. For example, if the salary component is:

Components Month days 30 Paid days 28
Basic Salary 15000 14000
HRA 6000 5600
Conveyance Allowance 1600 1493
Medical Allowance 1250 1167
Gross Salary 23850 22260

Leave encashment
Leave encashment is a separate part calculated as Basic Salary * Leaves / 30.

Dear Seniors, please correct me if I am wrong.

Regards,
Neeraj Kumar

Ideally, it's gross/30 = per day salary (this will include all the fixed salary components being paid monthly).

Please check the leave encashment policy of your company. Everywhere, it's paid on basic because the purpose is to encourage employees to take leave and not to have it encashed.

Dear Krishnendu Mukherjee,

You need to deduct all components. If you think logically, if the person was absent all the days of a month, and you were to deduct only the basic, then you would be paying him a part of his salary even though he was not in for the whole month. Thus, you deduct based on the gross rate.

As for your leave policy, personally, I believe it is wrong, but most companies do that. In effect, Hire-Link says it encourages employees to use their leave rather than consider it as additional pay. For long-term health and well-being, taking adequate leave is to be encouraged.