Guides
How to calculate LOP from unpaid leave
Last updated: 16 August 2026
Loss of pay (LOP) is the salary deduction for days an employee was not entitled to paid leave. In Indian SME payroll it is often guessed from a spreadsheet, a late WhatsApp, or “days in the month minus Sundays.” That is how people get underpaid or overpaid, and why HR and finance argue after the run is already closed.
A cleaner rule: LOP days come from approved unpaid leave in the payable window — not from unapproved absence, and not from paid leave that already consumed allocation.
1. Decide what counts as unpaid
Paid leave (annual, sick, and similar types with a yearly allocation) should reduce the balance when it is approved as paid. It should not also become LOP. Unpaid leave — including a paid type that the approver marks unpaid because the balance is exhausted — should not consume paid allocation, and should appear as LOP days in that month’s payroll.
If approvals are informal, payroll cannot tell the difference. A named approval workflow is what makes the unpaid flag trustworthy.
2. Use the payable window, not the calendar month blindly
Count only unpaid days that fall inside the payroll period (usually 1st–last of the month). A leave request that spans two months should split: March days in March, April days in April. Join date and last working day also clip the window — someone who joined on the 16th is not payable for the 1st–15th, and someone whose last working day is the 20th is not payable after that.
3. Convert days using the organisation’s working calendar
LOP is usually “unpaid leave days in the period,” where a full day is 1, a half day is 0.5, and short leave is the fraction your policy uses. Do not add Sundays, organisation holidays, or Saturday-off days as LOP: those were never payable working days.
Working days in the period = days in the period minus Sundays, minus Saturday-off (none, every Saturday, or 2nd and 4th), minus organisation holidays. Daily rate is then typically monthly gross ÷ working days (or ÷ calendar days — pick one policy and keep it). Leafwage uses the working-day calendar above for payable days and applies LOP from approved unpaid leave in that window.
4. Money: gross, then LOP, then other deductions
A simple, auditable sequence: start from monthly gross (Basic + HRA + other allowances), subtract LOP for the unpaid days, subtract any other deduction the admin recorded, and round to two decimal places for rupees. Net pay is what appears on the payslip. Do not silently round intermediate steps a second time — that is how two systems disagree by ₹1.
This is not statutory payroll. EPF, ESI, and TDS are separate obligations. Leafwage’s Salary & Payroll module is gross → LOP → net with a branded payslip PDF, for organisations that want leave and pay in the same tenant.
What not to do
- Treat every absence as LOP before anyone has approved it.
- Deduct LOP for paid leave that already used allocation.
- Count weekly offs and holidays as unpaid working days.
- Rebuild LOP from chat after the month has closed.
If leave still lives in Excel, the unpaid column is usually the first thing that drifts. See spreadsheet vs leave software and how leave management software keeps the unpaid trail. To try this on your organisation’s calendar, request access.
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