Accounts Notes: Leave and Attendance

Tuesday 12 April 2011

Leave and Attendance

What do you mean by LOP?
LOP stand for "Loss of Pay". In some organizations, this is also called "LWP" or "Leave without Pay".
LOP is done whenever an employee does not come in to work and does not apply for leave. For those days, his salary is not paid or he is under "Loss of Pay".
If an employee has a LOP, then the LOP generally affects all the Income components. For e.g. An employee has a Basic of 3000. This means, for 30 days of work, he is paid Rs. 3000. If the employee has a LOP of 1 day, then he is paid Basic for only 29 days (30 days - 1 day). So he will be paid Rs. 2900.
What do you mean by LOP-Reversal?
Let us assume that an employee has had an LOP for a month. i.e. his salary was paid less. Then the employee convinces the company that the LOP is not correct and the company agrees to it. So in the next month, the company has to pay-back the salary that was paid less. This process is called as "LOP Reversal".
How is Leave linked to Attendance?
Generally Leave is not directly linked to attendance. Only the "Absent" days, i.e. the days on which the employee has not applied for leave is considered in payroll as LOP days.
Sometimes, when an employee has to take leave, and does not have enough leave balance, then companies ask employees to apply for "Leave without Pay" (LWP). This is a special kind of Leave, where the company agrees for employees to go on leave, but without payment of salary.
Being absent is different from being on leave without pay. Absent is un-authorized. i.e. you have not come to work and not informed the company about this. "Leave without Pay" is when you get permission to not come to work, and you are not paid for these days.
What is Pro-rata?
Pro-rata refers to the concept of calculating a component based on the number of days that he has worked.
Please refer to the LOP example. You will observe that the employee is being paid for 29 days. This process of taking 3000 for 30 days and calculating the amount to be paid for 29 days, is called as pro-rating.
This is also the case for new joined. If a person joins on 18th of the month, then he will be paid only for 13 days. (i.e. from 18th to 30th). This is also a good example of pro-rating.
Similarly, when an employee leaves on 18th of the month, then he will be paid only for 18 days. (i.e. from 1st to 18th).
A normal way of doing pro-rating is: ( "component-value" * "Days worked" / "Days in the Month"). for e.g. if an employee's Basic is Rs. 3000 in the month of April. He has joined on 18th of April. Then his Basic for the month is calculated as "3000 * 13 / 30".
Similarly if he has left on 18th of April, then his basic is calculated as "3000 * 18 / 30"
What is Leave Encashment?
Companies allow employees to take money instead of leave. This process is called as "Leave Encashment'. Employees come regularly to work. So a lot of leave are accumulated in their account. So companies allow employees to encash (or take money).
In most companies, Leave is encashed only during settlement time. But few others allow leave encashment to be done during the employment also.