Sample values shown (₹30,000 gross, 2 LOP days, fixed 30-day method). Change them to get your own number.
| Method | Divisor | Per Day | LOP Deduction |
|---|
How Loss of Pay Works in India
Loss of pay (LOP), also called leave without pay (LWP), is the salary you forgo for days you were absent without a paid leave balance, without approval, or beyond the leave your policy allows. Payroll treats those days as unpaid: the month's fixed salary is prorated to the days actually paid, and the difference shows up on the payslip as an LOP deduction. There is no fine or penalty involved; it is simply pay for time not worked.
The Core Formula
LOP Deduction = Per Day Salary x LOP Days
Gross Payable = Monthly Salary minus LOP Deduction
Equivalent form used by most payroll software:
Gross Payable = Monthly Salary x (Paid Days / Divisor)
The formula is simple; the argument is always about the divisor. Indian employers use four conventions, and the same absence can cost noticeably different amounts depending on which one applies to you.
The Four Per Day Salary Methods
| Method | Divisor | Who uses it | Effect on deduction |
|---|---|---|---|
| Actual calendar days | 28, 29, 30 or 31 | Large corporates, most HRMS defaults | Lowest per day rate in 31 day months, highest in February |
| Fixed 30 days | Always 30 | The most common convention in Indian payroll | Same per day rate every month, easy to explain |
| 26 days | Always 26 | Minimum wage notifications, factories, contract labour | Higher per day rate; weekly off is treated as paid |
| Actual working days | Usually 20 to 27 | Some startups and daily rated roles | Highest per day rate, so the largest deduction per LOP day |
Two rules keep any of these methods fair. First, be consistent: the divisor used to deduct LOP should match the one used to pay for a joining or exit month. Second, count LOP days the same way you count the divisor. If the divisor is working days, only working days of absence are deducted; if the divisor is calendar days, absences that span a weekend usually count the weekend too (the so called sandwich rule, which depends on your leave policy).
What the Law Actually Says
No Indian statute fixes a divisor. What the law controls is proportionality. Section 20 of the Code on Wages, 2019, which came into force on 21 November 2025 and replaced Section 9 of the Payment of Wages Act, 1936, permits a deduction for absence from duty only where the employee was required to work and did not, and says the deduction may not bear a larger proportion to wages than the absence bears to the period the employee was required to work. In plain terms: two days absent out of a month cannot cost more than two days of that month's wages. Section 18(3) separately caps all deductions of every kind (absence, fines, advances, loss or damage, housing) at 50 percent of the wages for the wage period.
Deduction for absence is limited to the share of the wage period the employee was absent. Excess deduction is recoverable by the employee.
If 10 or more employees absent themselves in concert without due notice and reasonable cause, the employer may deduct up to 8 days of wages in lieu of notice.
Total deductions in a wage period cannot exceed half the wages. Anything beyond that must be recovered in a later period.
Minimum wage notifications express a monthly rate for 26 working days with a paid weekly off, which is why many establishments divide by 26.
Payslip Impact: PF, ESI, Tax and Benefits
LOP does not stop at the gross line. Because most statutory deductions are percentages of pay actually earned, they shrink with it.
Provident Fund. EPF is 12 percent of basic plus DA actually paid, matched by the employer (8.33 percent of the employer share goes to the pension scheme within the wage ceiling, which rose from Rs 15,000 to Rs 25,000 on 17 September 2026). If LOP reduces basic plus DA, both contributions fall in proportion. Where the employer restricts PF to the Rs 25,000 ceiling and the reduced basic is still above Rs 25,000, the contribution does not change at all. The unpaid days are reported to the EPFO as NCP days (non contributory period) in the monthly ECR, which keeps the pensionable service record accurate. The ECR accepts whole days only.
ESI. For employees with gross wages up to Rs 21,000 a month (Rs 25,000 for persons with disabilities), ESI is 0.75 percent employee and 3.25 percent employer on the wages actually paid in the month, so an LOP month means a smaller ESI deduction. Coverage itself is decided at the start of each contribution period (April to September, October to March) and does not change because of a single low pay month.
Professional tax and TDS. Professional tax is slab based on the month's gross in most states, so a large LOP can drop you to a lower PT slab. TDS under Section 392 of the Income-tax Act, 2025 (earlier Section 192) is recomputed on the projected annual salary, so tax for the year falls slightly and the monthly TDS is adjusted by payroll.
Leave and gratuity. LOP days generally do not count as service for earned leave accrual under most leave policies. For gratuity, continuous service is not broken by LOP as long as the employee has worked the required 240 days in the year (190 days for establishments working fewer than six days a week or below ground in mines), so occasional LOP does not affect gratuity eligibility.
Worked Examples
Example 1: Gross Rs 30,000, March 2026 (31 days), 2 LOP days, fixed 30 day method
LOP Deduction = 1,000 x 2 = Rs 2,000
Gross Payable = 30,000 minus 2,000 = Rs 28,000
Example 2: Same employee, same month, other methods
26 days: 30,000 / 26 = Rs 1,153.85 per day, deduction Rs 2,307.69
Working days (22): 30,000 / 22 = Rs 1,363.64 per day, deduction Rs 2,727.27
The gap between the gentlest and harshest method is almost Rs 800 for just two days, which is why it is worth knowing the convention in your appointment letter before you take unpaid leave.
Example 3: PF and ESI effect, basic Rs 15,000 within gross Rs 20,000, February 2026 (28 days), 3 LOP days, calendar method
Gross Payable = 20,000 x 25 / 28 = Rs 17,857.14
Reduced Basic = 15,000 x 25 / 28 = Rs 13,392.86
Employee PF = 12% x 13,392.86 = Rs 1,607.14 (was Rs 1,800)
Employee ESI = 0.75% x 17,857.14 = Rs 133.93 (was Rs 150)
NCP days reported in ECR = 3
LOP vs Leave Without Pay vs Absconding
LOP and LWP mean the same thing in payroll: approved or regularised unpaid leave. Unauthorised absence is also processed as LOP but can additionally attract disciplinary action under the standing orders or HR policy. Absconding (continuous unexplained absence, typically beyond the number of days stated in the policy) is a separate matter that can lead to termination; the salary treatment until then is still simple LOP, and the final settlement follows the usual full and final rules.
Related tools
- Pro-rata salary calculator: pay for a joining or exit month with the same divisor.
- Take-home pay calculator: see net pay on the reduced gross.
- Leave encashment calculator: value unused leave instead of losing pay.
- ESI calculator: check ESI for wages of Rs 21,000 or less.
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Sources
- PIB: four Labour Codes in force from 21 November 2025
- PIB: Cabinet raises EPFO wage ceiling from Rs 15,000 to Rs 25,000 (Sept 2026)
- EPFO: contribution rates and employer guidance
- ESIC: coverage and the Rs 21,000 wage limit
- Income Tax Department: Section 392, Income-tax Act 2025 (TDS on salary, earlier Section 192)
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Frequently Asked Questions
What is loss of pay (LOP) in salary?
Loss of pay, also called leave without pay (LWP), is the salary deducted for days an employee is absent without any paid leave balance or approved paid leave. The employer pays only for the days actually worked or covered by paid leave, and the salary for the LOP days is deducted proportionately from the month's pay.
How is LOP deduction calculated?
LOP deduction = (Monthly salary divided by the number of days in the pay period) multiplied by the number of LOP days. The divisor depends on the employer's policy: actual calendar days (28 to 31), a fixed 30 days, 26 days (the minimum wages convention for a six day week with paid weekly off), or the actual working days in the month. The Code on Wages, 2019 only requires that the deduction be proportionate to the period of absence.
Is LOP calculated on gross salary or basic salary?
In most Indian companies LOP is applied to the full monthly gross, so every fixed component (basic, DA, HRA, special allowance and so on) is reduced in the same proportion. Some employers apply it only to basic and DA. Your appointment letter or HR policy decides. Fixed reimbursements and employer contributions usually follow the reduced base too.
Does LOP reduce PF and ESI contributions?
Yes. EPF is 12 percent of the basic plus DA actually paid, so when LOP reduces basic plus DA the PF contribution falls in the same proportion (subject to the Rs 25,000 wage ceiling, raised from Rs 15,000 on 17 September 2026, where the employer restricts contributions). ESI is 0.75 percent employee and 3.25 percent employer on the gross wages actually paid, so it also reduces. The LOP days are reported to the EPFO as NCP days in the monthly ECR.
What are NCP days in PF and how do they relate to LOP?
NCP stands for non contributory period. It is the number of days in a wage month for which no wages were paid, so no PF or pension contribution was made. LOP days are reported as NCP days in the ECR. NCP days are entered as whole days; the EPFO return does not accept half days.
Which per day salary method is legally correct in India?
No law prescribes a single divisor. Section 20 of the Code on Wages, 2019 (in force from 21 November 2025, replacing Section 9 of the Payment of Wages Act, 1936) only says the deduction for absence must not be larger in proportion to wages than the period of absence is to the period the employee was required to work. Minimum wage notifications treat a month as 26 working days, which is why 26 is often called the statutory convention. Any consistent, proportionate method is acceptable.
Is there a maximum deduction for absence from duty?
Deductions for absence must be proportionate to the absence. The only exception is a concerted absence: if ten or more employees absent themselves together without due notice and without reasonable cause, the employer may deduct up to eight days of wages in lieu of notice. Separately, total deductions of all kinds from wages in a wage period cannot exceed 50 percent of the wages under Section 18(3) of the Code on Wages.
Can an employer deduct LOP for a half day?
Yes, if the leave policy provides for half day LOP. The deduction is half of one day's salary. However the PF return (ECR) only accepts whole NCP days, so payroll teams usually round the NCP figure and keep the actual half day deduction in the salary calculation.
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Disclaimer: LOP conventions are set by employer policy within the limits of the Code on Wages, 2019. PF and ESI figures use the statutory rates in force for tax year 2026-27 (EPF 12 percent, ESI 0.75 percent employee, Rs 25,000 EPF ceiling from 17 September 2026 and Rs 21,000 ESI ceiling). Values are estimates only and do not constitute legal or financial advice.