How-to
How to run monthly payroll in India with loss of pay (LOP) from approved leave
Short answer
Each month: freeze inputs (joiners, leavers, salary changes, approved unpaid leave); calculate loss of pay as (monthly salary ÷ days basis) × LOP days; work out EPF, ESI, Professional Tax and TDS on the earned wages; have a second person approve the pay run; then pay salaries, deposit TDS by the 7th and EPF/ESI by the 15th of the next month, and share payslips.
The monthly payroll cycle, step by step
- Freeze inputs a few days before the month ends: new joiners and their joining dates, exits and last working days, salary revisions, approved leave without pay, and any manual LOP days (for example unapproved absence).
- Calculate LOP for each employee (see the formula below) and the earned salary for the month.
- Apply statutory deductions on earned wages: EPF, ESI, Professional Tax (state slab), Labour Welfare Fund where applicable, and TDS on salary.
- Review and approve: one person prepares the run, another approves it. Hold salary for anyone who can't be paid yet, such as missing bank details.
- Pay with a bank transfer file, then share payslips.
- Deposit and file: TDS by the 7th of the next month; EPF (ECR) and ESI contributions by the 15th of the next month.
How to calculate loss of pay (LOP)
LOP deduction = (monthly salary ÷ days basis) × LOP days. Companies use one of three days bases. Choose one, write it into your salary policy, and apply it consistently:
| Days basis | Per-day rate in a 30-day month (₹60,000 salary) | Per-day rate in a 31-day month |
|---|---|---|
| Calendar days of the month | ₹2,000 | ₹1,935.48 |
| Fixed 30 days | ₹2,000 | ₹2,000 |
| Working days only (e.g. 22) | ₹2,727.27 | ₹2,727.27 |
LOP days normally come from leave without pay approved in your HR system, plus any days HR adds manually. Count them only within the employee's paid period: a joiner who starts on the 10th is paid from the 10th, and LOP applies only to days after that.
Worked example (November 2026, 30 days)
| Item | Calculation | Amount |
|---|---|---|
| Per-day rate | ₹60,000 ÷ 30 | ₹2,000 |
| LOP deduction | ₹2,000 × 2 | ₹4,000 |
| Earned salary | ₹60,000 − ₹4,000 | ₹56,000 |
| Earned basic (PF wages) | ₹30,000 × 28 ÷ 30 | ₹28,000 |
| Employee PF, contribution restricted to the ceiling | 12% × ₹25,000 | ₹3,000 |
| Employee PF, on full PF wages | 12% × ₹28,000 | ₹3,360 |
| ESI | Not applicable: gross wages above ₹21,000 | ₹0 |
Monthly salary ₹60,000: basic ₹30,000, HRA ₹15,000, special allowance ₹15,000. 2 days of approved leave without pay. Calendar-days basis.
₹25,000 is the EPF wage ceiling from 17 September 2026 (₹15,000 before). September 2026 itself is split between the two ceilings, so check your vendor's or consultant's treatment for that month. Under the labour codes, if excluded allowances exceed 50% of total pay, the excess is added to wages for PF and ESI.
Statutory deductions at a glance
| Item | Rate / rule | Deposit by |
|---|---|---|
| EPF | Employee 12% of PF wages. Employer 12%, of which 8.33% goes to EPS (capped at the wage ceiling) and the rest to EPF. Ceiling ₹25,000/month from 17 Sep 2026. | 15th of next month (ECR) |
| ESI | Employee 0.75%, employer 3.25% of gross wages, for employees earning up to ₹21,000/month | 15th of next month |
| Professional Tax | State-specific monthly slabs (not levied in every state) | As per state rules |
| Labour Welfare Fund | State-specific, monthly/half-yearly/annual | As per state rules |
| TDS on salary | Projected annual tax under the regime the employee chose (new regime by default), spread over the remaining months | 7th of next month (30 April for March) |
This is general guidance, not legal or tax advice. Rates and due dates can change; confirm with your payroll consultant or the EPFO, ESIC and income-tax notifications.
How FlowPay handles it
- Unpaid leave approved in FlowPeople flows into the pay run as LOP; HR can add manual LOP days in the run.
- Days basis is configurable (calendar days by default).
- EPF, ESI, PT, LWF and TDS (old and new regime, with employee declarations and HR override) are calculated per employee.
- Pay runs go through approval; employees who can't be paid (for example, missing bank details) can be put on hold.
- Outputs: payroll register, bank transfer file and payslips from your own Word template.
- Not yet: PF ECR / ESI return files, Form 16 and TDS returns, full and final settlement, off-cycle runs.
FlowPay is free up to 10 employees; Standard is ₹699/month including 25 employees. See FlowPay and pricing.
Frequently asked questions
How is loss of pay calculated in India?
LOP = (monthly salary ÷ days basis) × LOP days. The days basis is set by company policy: calendar days in the month, a fixed 30 days, or working days. For ₹60,000 a month with 2 LOP days in a 30-day month, the deduction is ₹4,000.
Is PF calculated before or after LOP?
After. PF is calculated on the wages actually earned in the month, so LOP reduces PF wages (for example earned basic). Where contributions are restricted, PF is capped at 12% of the wage ceiling, which is ₹25,000 from 17 September 2026.
When are TDS, PF and ESI due each month?
TDS deducted from salary is due by the 7th of the following month (30 April for tax deducted in March). EPF (via ECR) and ESI contributions are due by the 15th of the following month.
Sources
- EPF wage ceiling ₹25,000 from 17 Sep 2026: Keka Help Center (checked 11 October 2026)
- EPF wage ceiling: Corporate Professionals (S.O. 5109(E)) (checked 11 October 2026)
- Labour codes: wage rules effective 21 Nov 2025 (TaxGuru) (checked 11 October 2026)
- ESIC 2026 wage limit and contribution rates (IndPayroll) (checked 11 October 2026)
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