Quick answer: Loss of pay (LOP) is the deduction you make from salary for days an employee is absent without paid leave to cover them. Under section 20 of the Code on Wages, 2019, the deduction can’t exceed the share of the wage period the employee missed. You find the daily rate either by dividing monthly pay by 26 or by the month’s calendar days.
- Section 18 of the Code on Wages lists deductions for absence from duty as an authorised deduction.
- All deductions together are capped at 50% of wages in a wage period.
- The central rules convert monthly rates to daily by dividing by 26.
- Many employers use calendar days instead, as a written policy choice.
When does loss of pay apply?
When an employee is absent and has no paid leave left, or takes leave that wasn’t approved.
So the order matters. Check casual leave, sick leave and earned leave balances first. LOP applies only to the days left over. In Pune, the Maharashtra Shops and Establishments Act gives 8 casual leave days a year and earned leave at 1 day per 20 days worked.
Process matters too. The Wages (Central) Rules, 2026 require prior intimation and a seven-day chance to reply before an absence deduction, as Taxmann’s chapter guide records. Maharashtra’s own rules are still being finalised. Even so, log absences daily in your attendance and leave management system.
How do you calculate loss of pay in India?
Daily rate times unpaid days. The question is which daily rate.
Let’s say an employee earns ₹60,000 a month gross and has 2 LOP days in a month.
| Method | Daily rate | LOP for 2 days | Net of LOP |
|---|---|---|---|
| ÷26 (wage rules basis) | ₹2,307.69 | ₹4,615 | ₹55,385 |
| ÷30 (30-day month) | ₹2,000 | ₹4,000 | ₹56,000 |
| ÷31 (31-day month) | ₹1,935.48 | ₹3,871 | ₹56,129 |
| ÷28 (February) | ₹2,142.86 | ₹4,286 | ₹55,714 |
The ÷26 method treats a month as 26 working days. That matches how the central rules convert monthly pay to daily for overtime and minimum wage. It also costs the employee ₹615 more than the 30-day method in this example.
Calendar days are common practice. The amount changes slightly each month, but it’s easy to explain.
Pick one. Write it into your policy and use it every month.
What’s the limit on LOP?
Section 20 of the Code on Wages sets a proportion cap. The deduction can’t take a larger share of the month’s wages than the share of required working time the employee missed. Hence the ÷26 rate shouldn’t be applied to days the person was never required to work, such as weekly offs.
How does Remunance handle LOP for your India team?
Remunance runs leave administration and payroll together under its own Indian entity, so LOP comes straight from approved leave records. We agree the daily-rate method with you at onboarding, write it into the leave policy and show each LOP day on the payslip. Our guide on how to pay employees in India covers the wider pay run. To settle your LOP policy before the first payroll, book a short policy call with our team.
What else do people ask about loss of pay?
Does LOP affect PF and gratuity?
Yes, for PF. PF is 12% of wages actually earned, so LOP lowers it that month. Gratuity uses last drawn wages, so one LOP month at exit can reduce it.
Can LOP be reversed?
Yes. If leave is approved later or the deduction was a mistake, refund it in the next payroll run as an arrear.
Is LOP the same as unpaid leave?
Mostly. Unpaid leave is approved time off without pay. LOP is the salary deduction that follows it, or any unauthorised absence.