Salary calculation methods determine how an employee’s monthly salary is converted into a daily rate for payroll processing, accounting for attendance, leaves, overtime, and fines. The payroll application supports multiple methods to align with a company’s payroll cycle and workforce type (e.g., daily wage workers, salaried employees with weekly offs, or fixed-month employees). Choosing the right method is critical to ensure accurate salary calculations, especially when employees take leave or work partial days.
Calculation Methods: #
Calendar Month: #
The daily salary is calculated by dividing the monthly salary by the actual number of days in the month (e.g., 31 for May, 30 for April, 28/29 for February). This method is ideal for businesses with flexible schedules or daily wage workers, as it accounts for the exact number of days in a month.
Example:
- Employee’s monthly salary: ₹30,000.
- Month: May 2025 (31 days).
- Daily salary = ₹30,000 ÷ 31 = ₹967.74.
- Scenario: Employee works 28 days, takes 2 unpaid leaves, and 1 holiday.
- Salary = 29 days × ₹967.74 = ₹28,064.46
30-Day Month: #
The daily salary is calculated by dividing the monthly salary by a fixed 30 days, regardless of the actual days in the month. This method simplifies calculations and is ideal for businesses with consistent payroll cycles.
Use Case: #
Common for salaried employees in offices or industries with standardized monthly pay, like IT or corporate sectors.
Example:
- Employee’s monthly salary: ₹30,000.
- Daily salary = ₹30,000 ÷ 30 = ₹1,000.
- Scenario: Employee works 28 days, takes 2 unpaid leaves in May (31 days).
- Salary = 28 days × ₹1,000 = ₹28,000.
26-Day Month: #
The daily salary is calculated by dividing the monthly salary by 26 days. This method assumes employees work about 26 days a month because they get weekly offs, like Sundays (4–5 days off per month). It’s a simple way to pay employees who have regular days off each week.
Why Use It?: #
This method is great for businesses where employees work 4 or 5 days a week, like shops, restaurants, or factories. It ensures the salary accounts for weekly offs without complicated calculations.
How It Works: #
Instead of counting every day in the month, the 26-day method spreads the monthly salary over 26 working days, so each day’s pay is a bit higher to cover the days off.
Example:
- Employee’s monthly salary: ₹30,000.
- Daily salary = ₹30,000 ÷ 26 ₹1,154 (rounded for simplicity).
- Scenario: Employee works 24 days in May, takes 1 unpaid leave, and has 1 weekly off (Sunday).
- Salary = 24 days × ₹1,154 = ₹27,696.
Attendance Cycle: #
The daily salary is calculated based on a specific attendance period, which may not align with the calendar month. For example, the cycle could run from the 1st to the last day of the month (e.g., May 1–31) or from the 25th of one month to the 24th of the next (e.g., April 25–May 24). The daily rate is typically based on the number of days in the cycle.
Example:
- Employee’s monthly salary: ₹30,000.
- Attendance cycle: April 25–May 24 (30 days).
- Daily salary = ₹30,000 ÷ 30 = ₹1,000.
- Scenario: Employee works 27 days, takes 3 unpaid leaves in the cycle.
- Salary = 27 days × ₹1,000 = ₹27,000.
Choosing the Right Method: #
Calendar Month: #
Best for IT & Software, BFSI(Banking, Finance, Insurance), Retail & E-commerce, Telecom, and Manufacturing.
30-Day Month: #
Simplifies calculations for salaried employees with consistent pay cycles, ignoring monthly day variations.
26-Day Month: #
Perfect for employees with regular weekly offs (e.g., Sundays), ensuring pay accounts for non-working days in a simple way.
Attendance Cycle: #
Offers flexibility for businesses with unique payroll periods, aligning calculations with operational needs.
Mistake to Avoid: #
Mismatched Method:
#
Choosing a method that doesn’t suit your workforce (e.g., a 26-day Month for daily workers without weekly offs) can lead to overpayment or underpayment.
