Fixed LOP Deduction Based on Annual Salary

Introduction

This feature allows you to standardize Loss of Pay (LOP) deductions across all months, no matter how many days a month has. It's especially useful for organizations where monthly LOP deductions cause confusion due to variation between months.

With this enhancement, you can calculate LOP using a fixed per-day value based on the employee’s annual salary. This keeps salary deductions predictable and transparent.

Table of Contents

• Enable Yearly-Based LOP Calculation
• Monthly-Based LOP (Default)
• Yearly-Based LOP (New)
• How Yearly-Based LOP Calculation Works
• How Yearly-Based LOP Calculation Works
• Examples & Use Cases

Enable Yearly-Based LOP Calculation

1. Go to Settings > Payroll > Configure

   

2. Go to Pay Schedule > Update settings

   

3. Choose one of the following:

   • Based on days in a month (Default)
     LOP deduction varies based on the number of payable days in the current month.

   • Based on yearly calculation (New)
     LOP deduction is fixed using a per-day value derived from the annual salary

4. Click Save after making your selection.

Monthly-Based LOP (Default)

• Deduction = Monthly Salary ÷ Payable Days × LOP Days

• Varies depending on whether the month has 28, 30, or 31 days.

Yearly-Based LOP (New)

• Deduction = Annual Salary ÷ 365 × LOP Days

• Per-day rate stays constant throughout the year.

How Yearly-Based LOP Calculation Works

1. Convert monthly salary to annual salary
   Example:
   Monthly Basic = ₹30,000
   Annual Basic = ₹30,000 × 12 = ₹3,60,000

2. Calculate per-day value
   ₹3,60,000 ÷ 365 = ₹986.30

3. Deduct based on LOP days
   LOP Days = 2
   Deduction = ₹986.30 × 2 = ₹1,972.60

4. Final salary
   ₹30,000 − ₹1,972.60 = ₹28,027.40

This remains the same regardless of the month.

Examples & Use Cases

Example: Mid-Month Joiner

• Cycle Payable Days = 30

• Employee Payable Days = 20

• LOP Days = 10

• Deduction = 10 × Per-Day Value (based on selected method)

Example: Employee with Multiple Salary Structures

If an employee changes salary mid-month:

• LOP deduction is split.

• Each LOP day uses the per-day rate of the salary active on that day.

Example: Paid Sick Leave + Unpaid Leave

• Paid Sick Leave = 2 days

• Unpaid Leave = 1 day

• Total LOP Days = 3

• Deduction = 3 × Per-Day Value