Loss of Pay (LOP): Meaning, Formula and Common Payroll Mistakes
Loss of pay is the salary deducted for days an employee is absent without paid leave. The formula is monthly gross divided by your chosen day count, times the LOP days. On ₹45,000 with 2 LOP days, dividing by 30 deducts ₹3,000 and dividing by 26 deducts about ₹3,462, so fix the method in your policy.
Loss of pay, or LOP, is the salary deducted for days an employee was absent without paid leave. It looks simple, but the method you choose changes the amount, so it needs a written policy.
When LOP applies
- ✓The employee has no leave balance for the days taken.
- ✓The absence was not approved, or leave without pay was approved.
- ✓The employee joined or left in the middle of the month.
- ✓Late arrivals beyond the limit are converted into half-day absences, if your policy allows it.
The basic formula
LOP amount equals gross monthly salary divided by the number of days in the denominator, multiplied by the days of LOP.
Which denominator?
- ✓Calendar days: Divide by 30 or 31. Simple, and a day of LOP costs less in a 31-day month.
- ✓Working days: Divide by the working days in that month. Fits employers with a fixed weekly off.
- ✓Fixed 26 or 30: Uses one number all year, easy to explain, though it may not match the real month.
Pick one method, state it in the HR policy and apply it to everyone.
Worked example
An employee earns ₹45,000 and takes 2 days LOP in a 30-day month. Using calendar days, the daily rate is ₹1,500 and the LOP deduction is ₹3,000. Using 26 working days, the daily rate is about ₹1,731 and the deduction is ₹3,462. The gap is why the method must be fixed in advance.
Mistakes to avoid
- ✓Deducting from basic only while paying other allowances in full.
- ✓Forgetting to adjust PF and ESI wages when LOP changes the paid wage.
- ✓Applying LOP to weekly offs and holidays that fall between absent days without a clear sandwich rule.
- ✓Processing LOP after the payslip has been issued, instead of in the same cycle.
A fair LOP policy is one the employee can verify with a calculator.
Payroll systems that read approved leave and attendance directly can compute LOP automatically and show the working on the payslip.
Written by
HR Manager, Airwix Technologies (Sleet)
Nihit Dobariya is the HR Manager at Airwix Technologies in Ahmedabad, where he runs HR and payroll for the team behind Sleet. He writes about payroll, PF and ESIC, professional tax, the labour codes and everyday HR practice for Indian employers, and checks each rule against the official notification before it is published.
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