Base days for monthly salary calculation
Recently, we received a question from an HR manager, “Do we pay salary for the total number of calendar days in a month or only for the working days, after deducting the number of Sundays and other holidays in a month?”
Of course, organizations pay the same salary each month to an employee who works the entire month. The number of days for which salary is calculated in a month becomes relevant when an employee is paid only for a part of a month – in the first month of service, if the employee does not join the organization on the first day or in the last month of service, if the employee does not work until the last day of the month. The number of days for which salary is paid is relevant even in case of loss pay.
For example, if the monthly gross salary of an employee is Rs 30,000 and the employee joins an organization on 31st May, should his salary for May (for one day of work) be Rs 30,000/31 (calendar day basis) or should it be Rs 30,000/30 or Rs 30,000/26 (on a fixed number of days basis)?
If the monthly gross salary of an employee is Rs 30,000 and the employee has loss of pay for 2 days in May, should the loss of pay value be Rs (30,000/31) x 2 (calendar day basis) or should it be Rs (30,000/30) x 2 or Rs (30,000/26) x 2 (on a fixed number of days basis)?
The question, at a fundamental level, is: What should be the base days for salary calculation?
We find organizations in India adopting different bases for pay calculation.
1. Calendar days
This is probably the most widely adopted basis. In the calendar-day basis, the per-day pay is calculated as the total salary for the month divided by the total number of calendar days.
For example, if the total monthly salary of an employee is Rs 30,000, and if the employee joins an organization on September 21, the employee will be paid Rs 10,000 for the 10 days in September. Since September has 30 calendar days, the per-day pay is calculated as Rs 30,000/30 = Rs 1,000.
For the first or the last month of service, an employee – depending on whether he or she joins or leaves the organization in a 30 day or a 31 day month – will receive different pay amounts for the same number of service days. In the above example, if the same employee joins the organization on October 22 (instead of September 21) and works for 10 days in October, he or she would receive only Rs 9,677 (after rounding off) in October. Since October has 31 days, the per-day pay is calculated as Rs 30,000/31 = Rs 967.74.
2. Calendar days adjusted for Sundays
This is a variant of the Calendar day basis. In this method, the pay per day is calculated as the total salary for the month divided by the total number of calendar days minus Sundays.
For example, let us assume that an employee joins an organization in September which happens to have 4 Sundays. If the employee’s total monthly salary is Rs 26,000, and if the employee joins on September 21, he or she will be paid Rs 10,000 for the 10 days in September. Since September has 26 base days (30 minus 4 Sundays), the per-day pay is calculated as Rs 26,000/26 = Rs 1,000.
Some organizations add holidays to the total number of Sundays in order to arrive at the base days for the month. In other words, the total number of days for which salary is calculated each month varies from one month to another depending on the number of calendar days, Sundays, and other holidays.
3. Fixed number of days, such as 26 or 30
In some organizations, the per-day pay is calculated as the total salary for the month divided by a fixed number of days, such as 26 or 30.
If an organization uses 26 as the fixed number of base days each month, an employee who joins on September 21 and whose monthly salary is Rs 26,000, will get paid Rs 10,000 for the 10 days in September; the per-day pay is calculated as Rs 26,000/26 = Rs 1,000.
In the fixed days method, an employee, whether he joins or leaves the organization in a 30 day or a 31 day month, will get the same pay amount for the same number of pay days. In the above example, if the employee joins the organization on October 22 (instead of September 21), he would be paid the same amount of Rs 10,000 (for 10 service days) since both September and October are 26-day months from the point of view of payroll.
Of course, the discussion on days for which salary is paid is relevant only for employees who have to be paid for less than a month – due to loss of pay or in their first or last month of service. For employees who have to be paid full salary for the month, the base days are of no consequence.
Given that organizations follow different base days for pay calculation, is there is a particular method which can be said to be statutorily and logically correct?
What do the statutes say regarding base days?
The key statutes which refer to salary payment are The Payment of Wages Act, 1936, The Industrial Disputes Act, 1947, The Payment of Gratuity Act, 1972, The Shops and Establishment Act, and The Factories Act, 1948.
Surprisingly, none of the statutes except The Payment of Gratuity Act directly specify how many base days exist in a month. The Payment of Gratuity Act states that the number of base days in a month shall be 26 for the purpose of gratuity calculation.
The Industrial Disputes Act, which deals with issues such as retrenchment salary, defines the term “average pay,” in case of monthly paid workman, as the average of the wages payable “in the 3 complete calendar months.” There is no explicit reference to how the per-day salary should be calculated.
According to the Minimum Wages Act, the minimum rates of wages may be fixed by wage-periods, namely, by the hour, by the day, by the month, or by such other larger wage-period as may be prescribed. In addition, “where such rates are fixed by the day or by the month, the manner of calculating wages for a month or for a day, as the case may be, may be indicated.” Here again, there is no reference to how the per-day wage should be calculated.
The Factories Act states that each worker shall have one day off (Sunday or any one of the three days immediately before or after Sunday) each week. However, the Act is silent on whether the weekly holiday should be a paid holiday or not. Hence, it follows that if the weekly holiday is a paid holiday, then the organization shall calculate the per-day pay on the basis of the calendar days in the month. If the weekly holiday is not considered to be a paid holiday, then the total base days in a month shall be the total number of calendar days in the month minus the total number of Sundays or any other weekly off days. For example, if there are 4 Sundays (weekly off days) in September and October, the total base days in September shall be 26 (30 minus 4) and the total base days in October shall be 27 (31 minus 4).
The Shops and Establishment Act, legislated by the states in India, specify that employees should be given weekly holidays. According to the Tamil Nadu Shops and Establishment Act, “Every person employed in an establishment shall be allowed in each week a holiday of one whole day.” Further, “No deduction shall be made from the wages of any person employed in an establishment on account of any day or part of a day on which a holiday has been allowed.” The Karnataka Shops and Commercial Establishment Act too requires that employees be provided one day off each week and no wage deduction shall be done for the weekly holiday.
As far as the Shops and Establishment Act and the Factories Act- the 2 statutes which govern the majority of the organizations in India – are concerned, it can be concluded that the base days for monthly salary calculation shall either be the calendar days in a month or the number of calendar days after deducting the number of weekly off days.
Other statutes which govern sectors such as mines (The Mines Act 1952), plantations (The Plantations Labour Act, 1951), and transportation sector (The Motor Transport Workers Act, 1961) can also be referred to in this regard.
A fixed number of days (such as 26 or 30) as base days
The use of a fixed number of days such as 26 or 30 each month leads to inconsistencies in salary calculation and organizations should consider avoiding this method. Here is an illustration to describe the problem with calculating per-day salary on the basis of 26 days.
Let us assume that the monthly salary for an employee is Rs 26,000, which works out to Rs 1,000 per day (Rs 26,000/26). For employees who join the organization in the month of October (which has 31 calendar days) the salary calculation shall be as follows.
For those who join in early October, the number of days paid must be as per the number of days not worked in October. For example, employees who join on October 1 will have zero “not worked” days and hence will get paid Rs 26,000 as salary. Employees joining on October 2 will have 1 “not worked” day and hence will get paid Rs 25,000 as salary and so on. The “not worked” days logic will not work till the end of the month since as per this logic anyone who joins on the 27th of October will have 26 “not worked” days and hence will receive Rs 0 as salary.
For those who join towards the end of the month, one should use “worked” days instead of “not worked” days for salary calculation. For example, employees who join on October 31 will get salary for 1 day (Rs 1,000), employees joining on October 30 will get salary for two days (Rs 2,000) and so on.
The problem in using a fixed number of days such as 26 as the base days for pay calculation is that at some point in time during the month the payroll manager should switch from the “not worked days” basis to the “worked days” basis, and whenever the switch is made, there will be a problem of logical inconsistency. With regard to our above example, let us assume that the switch is made on October 16. A simple calculation shows that an employee who joins on October 15 will get paid Rs 12,000 as salary for the month of October (on the basis of the “not worked days” method) and another employee who joins one day later on October 16 will get paid Rs 16,000 (on the basis of the “worked days” method) – please see the table below. Needless to say, this is illogical and not fair to the employee who works for more number of days.
The table below presents salary calculations for employees who join on different dates in October for a monthly salary of Rs 26,000. The organization calculates salary on the basis of 26 days each month.
N W Days (in the Calculation Method column) refers to “Not Worked” days
Date of Joining |
Base Days | Calculation Method | Not Worked Days | Salary Days | Salary (Rs) | Calculation Method | Worked Days | Salary (Rs) | |
---|---|---|---|---|---|---|---|---|---|
1 | 26 | N W days | 0 | 26 | 26000 | Worked days | 31 | 26000 | |
2 | 26 | N W days | 1 | 25 | 25000 | Worked days | 30 | 26000 | |
3 | 26 | N W days | 2 | 24 | 24000 | Worked days | 29 | 26000 | |
4 | 26 | N W days | 3 | 23 | 23000 | Worked days | 28 | 26000 | |
5 | 26 | N W days | 4 | 22 | 22000 | Worked days | 27 | 26000 | |
6 | 26 | N W days | 5 | 21 | 21000 | Worked days | 26 | 26000 | |
7 | 26 | N W days | 6 | 20 | 20000 | Worked days | 25 | 25000 | |
8 | 26 | N W days | 7 | 19 | 19000 | Worked days | 24 | 24000 | |
9 | 26 | N W days | 8 | 18 | 18000 | Worked days | 23 | 23000 | |
10 | 26 | N W days | 9 | 17 | 17000 | Worked days | 22 | 22000 | |
11 | 26 | N W days | 10 | 16 | 16000 | Worked days | 21 | 21000 | |
12 | 26 | N W days | 11 | 15 | 15000 | Worked days | 20 | 20000 | |
13 | 26 | N W days | 12 | 14 | 14000 | Worked days | 19 | 19000 | |
14 | 26 | N W days | 13 | 13 | 13000 | Worked days | 18 | 18000 | |
15 | 26 | N W days | 14 | 12 | 12000 | Worked days | 17 | 17000 | |
16 | 26 | N W days | 15 | 11 | 11000 | Worked days | 16 | 16000 | |
17 | 26 | N W days | 16 | 10 | 10000 | Worked days | 15 | 15000 | |
18 | 26 | N W days | 17 | 9 | 9000 | Worked days | 14 | 14000 | |
19 | 26 | N W days | 18 | 8 | 8000 | Worked days | 13 | 13000 | |
20 | 26 | N W days | 19 | 7 | 7000 | Worked days | 12 | 12000 | |
21 | 26 | N W days | 20 | 6 | 6000 | Worked days | 11 | 11000 | |
22 | 26 | N W days | 21 | 5 | 5000 | Worked days | 10 | 10000 | |
23 | 26 | N W days | 22 | 4 | 4000 | Worked days | 9 | 9000 | |
24 | 26 | N W days | 23 | 3 | 3000 | Worked days | 8 | 8000 | |
25 | 26 | N W days | 24 | 2 | 2000 | Worked days | 7 | 7000 | |
26 | 26 | N W days | 25 | 1 | 1000 | Worked days | 6 | 6000 | |
27 | 26 | N W days | 26 | 0 | 0 | Worked days | 5 | 5000 | |
28 | 26 | N W days | 27 | -1 | -1000 | Worked days | 4 | 4000 | |
29 | 26 | N W days | 28 | -2 | -2000 | Worked days | 3 | 3000 | |
30 | 26 | N W days | 29 | -3 | -3000 | Worked days | 2 | 2000 | |
31 | 26 | N W days | 30 | -4 | -4000 | Worked days | 1 | 1000 |
The above problem exists – whether the base days are 26 or 30 days – for salary calculation in the first or last month of service when an employee works for less than full month, and in case of loss of pay. The problem ceases to exist only when the calendar day basis or its variant is used for pay calculation.
An employee (new joinee or exiting employee), whose monthly gross pay is Rs 30,000, works for 10 days in the month of July (31-day month). The per-day salary in July as per company’s calculation is Rs 1000 (Rs 30,000/30 days). Hence, the company would pay the employee Rs 10,000 as salary (for 10 days) in July. If the company were to follow the calendar day logic, the per-day salary in July shall be Rs 967.74 (Rs 30,000/31 days) and hence for 10 days, the company shall be paying only Rs 9,677 (instead of Rs 10,000) in July.
There are more 31-day months (7) than 30-day months (4) in a calendar year. The “overpayment” will happen in 7 months (31-day months) in a calendar year.
Arguments in favor of the fixed-days method are fallacious. A typical argument we hear in favour of the fixed-days method is as follows.
Let us maintain consistency across 30 and 31 day months. Whether an employee joins on September 21 or October 22 (and hence works for 10 days) they should be paid the same salary.
Given the Gregorian calendar system, organizations which make monthly salary payments have chosen to pay the same amount as salary whether it is a 28 or 30 or 31 day month. What about consistency there?
We wonder how organizations that follow the fixed days logic resolve the problem inherent in the method. Or maybe they don’t, and just pay employees whatever salary amount comes out of applying this method.
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Leave a Comment (35) ↓
Thank you for sharing this useful information.
Very good information and thorough research job!
As a tech lead of a similar payroll project, I was faced with exact same question and the only solution that I could come out was to have a configuration section that defines which basis is to considered. This shields my app from future Policy/Act changes. As a generic payroll app, we may be required to take different approaches to different group of employees within a single company!
Another very important aspect that is ignored by most payroll accountants is to look at the employment contract and see how the salary was structured and on which frequency a pay-head offered is based on. In my company, some employees are offered contracts on daily/monthly basis, while most others are offered Annual contracts (CTC). So, if the employee is offered that you will be paid 30000 per month, then fixed number should be considered but if it was annual CTC, then it should be actual calendar days. This is also important for entitlements (typically reimbursements) which are allotted on annual basis.
Hope this is helpful.
Kinjal
Sir,
If a daily wage worker whose one day basic+vda is Rs. 276 then but will be the salary for the period 16-01-2016 to 31-01-2016 a worker can get. ( He did duty for 14 days in that period and there is two days weekly rest )
We are unable to understand your question. Can you please rephrase it?
मैं सुरेंद्र कुमार दिल्ली नगर निगम शिक्षा विभाग में चौकीदार के पद पर कार्य करता हूं 2003 से डेली वेज यानी के दैनिक वेतनभोगी कर्मचारी 2012 में मुझे कांटेक्ट पर कर दिया गया तब भी मुझे par-day वाली ही सैलरी मिलती है 31 दिन ड्यूटी करके वह भी 20 घंटे की सैलरी 26 दिन की मिलती है जोकि 3 68 रुपए 1 अप्रैल 2016 से हुआ है 4 वर्ष से मुझे साप्ताहिक अवकाश नहीं मिलता जिसकी सूचना विभाग को कई बारी लिखित में द* चुका हूं लेकिन विभाग ने कोई भी कार्यवाही नहीं की नौकरी से हटाने की धमकी भी दी जाती है
May 1, 2016 is Sunday. it is mandatory to pay for the public holiday. but this public holiday is on the weekly holiday. how can we give the payment for May 1, 2016 and what is the calculation of monthly salary. please advise me.
If you are paying the monthly salary for all 31 days in May, it shouldn’t matter that 01-May-2016 falls on a sunday.
can anyone guide if a person done half day on saturday takes leave and joined on tuesday whether sunday salary will be deducted or not. please guide as per rules.
That would depend on the leave rules your organization follows. However, please ensure that your organization provides for the paid weekly-off as per statutes (e.g. S&E Act or The Factories Act).
Hi, can you please guide me, if i have joined an org on 9th and worked on 9th and then went on leave and joined back on 19th . In that case, how is the LOP calculation? Is it on 10 days or excluding Sunday as per TN shops and Establishment Act ? If any relevant section or rule. Pls quote.
Thanks in advance for your help !
Please exclude Sunday and other public holidays for loss of pay calculation.
I ve a small dought. I my company salary statement calculation date is 2oth of previous month to 21st of present month.
If employee join on 23rd how many days of salary we ve to pay(counting 20st of previous month to 21st of present month)
In the sameway if employee join on 3rd
if employee join on 30th
Pls ans to my question as early to my mail id. It will helpout me
Depends on what basis you calculate salary. For example, there are 2 possibilities here.
1. You could calculate salary on the basis of the total number of days between 21 and 20 (similar to the calendar day logic).
2. Some calculate salary for a fixed number of days (such as 30) each month.
Sir
Even if u consider to go with actual calenders days , then the per day salary won’t be same , resulting inconsistency salary deduction for the same employee who takes leave in different calenders month.
Ex:
Employee who draws salary of 31k , was on leave for 1 day in March , as well 1 day in Apr , let us see the deduction now.
March per day salary =31000/31=1000
April per day salary =31000/30 =1033.33
So for 1 day leave of April would cost employees more than of Mar , situation would be worst on February more.
There is nothing wrong in having a different per-day salary across months. Please note that we pay the same salary to an employee across months with different calendar days. If we can accept that then different per-day salary across months should also be acceptable.
If salary process at fixed days like 30days or 26 days then what number of days we write at salary slips means in month of may (31days) services given by employees.
Please revert
You can state the total number of days in the month on the payslip.
Sir,
So while calculating salary on canlender day basis we sould deduct public holidays also?
That would depend on your organization’s policy. Most organizations do not deduct the number of public holidays from the total number of calendar days.
Sir,
I have gone through your write up and am impressed about the way you have tried to explain the situations from different angles.
Thanks a lot.
Please suggest if any work on February month monthly salary ishould be decided by 30 days or 28 days.
28 days
I want to ask my company pay salary as base of 26 days. But my question is. in a month of May there is 31 days and we are came office 27 days. But they are pay salary according to 26 day then why we give our 1 day to company. And this company is a small firm they are not providing tea, travelling exp, or other exp. What we do Pls help
Please ask your company to pay wage on the basis of calendar days in a month.
Hello Sir,
Thanks for brief explanation, I have been searching for few days in web.
In our company, we calculate salary based on number of days in a month 28, 30, 31, the no.of days of that month
Let’s say, employee salary is 30,000 per month, salary month is June (30 days), and employee worked without taking any leave for that month ( excluding Sundays and public holidays )
Final salary = (30000/30) * No.of working days
Let’s assume, In June, there are 5 Sundays and 1 public holiday
Do we need to include the Sundays and other public holidays in “No.of working days” or exclude from the total No.of days ( 30 days )
No.of working days = 30 or ?
No.of working days = 24 ?
Final salary = (30000/30) * 30 ?
Final salary = (30000/30) * 24 ?
Please clarify
Thanks in advance 🙂
Final salary = (30000/30) * 30
Thank you so much for your reply, i have been keep visiting this page.
My another question is:
If an employee worked only 2 days in a month and took leave for remaining days, in this case,
Do we need to pay for 6 days ( 2 working days + 4 Sundays ) ?
Final salary = (30000/30) * 2 ?
Final salary = (30000/30) * 6 ?
Thanks 🙂
Salary for 2 days in June = (30000/30) * 2
Salary for 2 days in July = (30000/31) * 2
Salary for 2 days in Feb (non-leap) = (30000/28) * 2
Thanks,
is there any rules, when to include and not include the Sundays ?
Please consider Sundays as paid holidays. Hence, the total number of days for which salary is paid is the actual calendar days in a month.
Okay, thank you !
Sir my company is providing salary on basis of working days, although it some basic, allowance, traveling allowance etc. Is mentioned in my pay slip. So just want to know this is fair enough or not ?
There is no issue with this.
In my company the payroll cut off date is 25th of every month. If an employee joins on 20th, then, how I need to calculate PF. It from 20th to 25th or 20th to 30th ?
Please confirm?
PF should be calculated for each calendar month.