What is Leave, Attendance and LOP data in Indian Payroll Processing?

Employee leave and attendance

Payroll is a vast process and each step involved in the entire cycle plays a significant role. Employees are the base of every ongoing activity in an organization. Being the biggest asset of a business set up, employees owe the expected ROI. Achieving that ROI is not the sole responsibility of an employee but teamwork.

While employees are engaged in their tasks, HR’s task is to manage the employees. Managing the resources is not as easy as it seems. It’s a whole avalanche of tasks to be accomplished. One of them is tracking leave and attendance of employees. While calculating the ‘net-salary’ of employees, the leave and attendance information plays a vital role. 

Keeping track of leaves and attendance of employees is a daunting task. One of the significant challenges of the employers is to manage the time of employees effectively so that everyone in the organization is productive. Employee leave & attendance management involves keeping records of sick leaves and holidays, as well as ensuring that the payroll gets done in an error-free manner and on time.

The most common type of leaves in the Indian Payroll System

Sick leave

Sick leave is time off given by the company to allow employees to recover from an illness and take care of their health. Usually, an employee is entitled to sick leave only after a stipulated period of employment in an organization.

Casual leave

Casual leave is taken by an employee for travel, vacation, rest, and family events. There are different rules for the number of days that casual leaves can be taken at a stretch varying between three to five to seven days. Giving the employee paid casual leave will allow them to prioritize their private life when required, making them feel appreciated in the company.

Maternity Leave

This provision is especially available for those women employees who plan to have a baby. The duration of paid maternity leave is 12-26 weeks and this can be further extended with 16 months of unpaid leave. No deductions can be made from the leave account of the female employee.

Paternity leave

Paternity leave is granted to new fathers, husbands or partners of a pregnant woman. Unlike maternity leaves, new fathers usually get 2 weeks of leave to take care of their child post-delivery.

Earned Leave or Privilege Leave

The type of leave which the employees earn as they work for an organisation for a specified number of days. The privilege leave is sanctioned to the employees without any salary deductions. The number of privilege leaves admissible may vary on the basis of industry and region.

Study Leave

An employee may be granted a study leave to enable him to update his knowledge and experience in a way that he will be of greater use to the Institute after rejoining.

Types of holidays in India

National Holidays

These are the fixed holidays that we have in India on the 26th of January, 15th of August, and 2nd of October every year.

Weekly Holidays

There are either one or two weekly holidays at the end of the week for all the employees depending upon the organizational policy.

Religious holidays

Diwali, Christmas, Eid, Holi – your employee is sure to place importance on religious holidays that they celebrate and would want the day off to spend time with their family and observe the festival.

What is LOP (Loss of Pay)?

Leave taken by the employee when he/she does not have leave balance in his/her account but given permission to remain absent. So, this absence is an authorized one. If an employee has no enough leaves to his credit, the employer can permit leave without pay.

Loss of pay is done when an employee does not come to work and apply for leave. It means, no salary will be paid for a particular day. Loss of pay calculation is based on the calendar day logic. Some employers also state in their policies that any leave availed in violation of leave policy would also become LOP.

An example being, using earned leave without prior intimation or approval, or not providing medical certificates in case of sick leave as per policy. You will see that the salary you receive at the end of the month would be reduced due to ‘LOP’.

LOP Calculation

Calculation of the number of days for a given pay period has a significant impact when deducting salary for Loss of pay due to leave or other reason.

Ex: Loss of pay when days = 30
-> INR 30,000/30 = INR 1,000

Loss of Pay when days are calculated excluding Weekends
let’s say there are 8 Saturdays and Sundays in month
Effective days = 30-8=22 days
Loss of Pay = INR 30,000/22=INR 1,364/-

What is Leave Encashment?

Leave encashment refers to an amount of money received in exchange for a period of leave not availed by an employee. Encashment of accumulated leave can be availed by an employee at the time of retirement, during the continuation of service or at the time of leaving the job. The leave encashment policy varies from employer to employer.

Some employers pay for the un-availed leaves in the next calendar year. Some let the employees carry forward the balance leaves in a year to the next year. And the employer pays for the un-availed leaves at the time of leaving the job. Income tax treatment of the amount received towards leave encashment depends on the type of employment – private or government – and time of – in-service or at the time of retirement.

Recommended read: Data requirements to run payroll in India| Gathering Leave and attendance data

Conclusion

HR is not anymore just about overseeing resources; the department acts as an accelerator in organizations with a growth mindset. When the HR department is majorly equipped with tools like paper forms, emails, and excel sheets, the growth of HR is exceptionally troublesome and there is zero chance HR can play a significant role other than resource management.

While processing payroll, data plays an imperative role; leave and attendance data is a significant element of payroll calculation. Navigating the leave management minefield without a leave management system is a tricky challenge. Even small stumbles can cause disasters like resource crunch, payroll processing errors, and legal complications. An organization must reduce the effort and implement leave and attendance management software for smooth functioning.