Process of Managing Loss of Pay (LOP Reversal)

Regarding an employee's attendance, LOP days means ‘Leave without Pay- LWP Leave’ or ‘Loss of Pay- LOP Leave’. The LWP is the type of leave used if you, as an employee on any given day, fail to be present for work with no suitable explanation or leave application (under the sick leave or vacation leave quota of leave available to you). This is important since your LOP affects your salary or earnings in that month and has certain repercussions on promotions. For example, if your basic salary is ₹30,000 for 30 days, you will get your full salary only if no LOP is available in that month. If you avail of 2days LOP, then only 28 days basic salary is paid, or ₹28,000 is your salary for that month. Hence, it is important to be familiar with the LOP, its reversal, regularization, management and factors determining it.

Did you know? 

Post the pandemic, a large number of companies (3074 respondents) fired staff (15%), stopped hiring, and resorted to cost-cutting of salaries or loss of pay leave (39%) to survive the crisis, as per Economictimes.com.

What is LOP Reversal?

So what can you do about your LOP? The company can consider a LOP Reversal when you fail to work on any day and have not applied for either sick leave or a day’s vacation due to circumstances beyond your control. Such a LOP Reversal allows you to re-qualify for that day’s pay. However, this LOP is discretionary, and if you call in sick, this needs to be backed up by a doctor’s certificate or other relevant documents. LOP reversal depends on the company’s policies. 

Factors that count for LOP in salary

Specific industries follow set regulations and are based on its policy towards loss of pay when calculating LOP in salary slip or the actual loss of salary. The main factors considered when marking LOP in salary are:

• Length of the employment contract: Some employees on an annual contract will have their annual income considered when LOP calculations are made, depending on the company policy.
• Nature of work: Certain employees who work in sectors considered critical and hazardous for other employees may not be permitted for LOP.
• Tenure of employee: Normally, probationary employees, are not allowed LOP without a valid and urgent reason like injury, sickness, death in the family, etc.
• Rate or Scale of pay: Employees with managerial level or high-end responsibility may not always be provided with the scope of availing LOP. 
• Presence of additional benefits: Full-time employees may be eligible for offsets of LOP against other benefits like sick leave, vacation pay, bonus, overtime etc. 
• Company discretion: At times, a valuable employee may be permitted LOP when they are sick for over 6 months, have a poor attendance record, or have not been able to meet the company’s work requirements.

Also read: ESI Calculation - How is ESI Computed?

Factors that do not count as LOP in salary

So, what are the factors that do not count as LOP? Let’s briefly discuss these.

• If you suffer from an injury or illness that affects your ability to do your job satisfactorily, the leave cannot be considered under LOP. A simple example is contracting conjunctivitis, which is highly infectious and needs you to recover under a doctor’s supervision for a week or two. Since you cannot work properly at your job and may spread the infection, you may be allowed additional LOP leave if sick leave is exhausted. 
• Suppose the company permits you to work in a different department after you meet with an accident and cannot walk. You will require a fitness certificate from a specialist doctor to certify that you can resume your desk duties or execute the new duties assigned to you.
• Now, for example, if you are disabled in an accident, however, a work needs to be completed mandatorily, such employees may be reassigned or allowed to complete the whole or part of the contracted work. If you receive health care benefits like medical insurance coverage, such an employee can opt for medical treatment, and such periods of leave will not be considered LOP. You can also consider several available options, like reversing and reducing the LOP, laterally transferring jobs or a transfer request to some other company.

Procedure to update LOP-Reversals 

Attendance of all employees plays a critical role in the company's work, management, and administration. Many smaller companies use HR management systems to maintain their attendance and make LOP or Loss of Pay adjustments. This system is used to automatically track the log in of employees, calculate and pay employee salaries and recover the LOP amounts from the employee’s salary every month. Some companies may not invest in an HRMS or biometric system and update attendance records and LOP reversals manually. 

 The HR department is mandated to track all employee attendance and log-in details. If the employee does not report for work and has not applied for suitable leave, the day’s attendance is marked as ‘loss of pay’ or LOP, and the loss of pay means salary for that day is not paid. At times, the employee may face a technical issue, or due to a manual error, the attendance for the day may be wrongly marked LOP. Such incorrect entries need to be corrected with a LOP Reversal and have the effect of getting reimbursement from the company for that day’s salary. At other times, the employer company may decide in keeping with the company policy to allow a LOP reversal based on a case-to-case basis.  

Here is how you can easily enter the LOP reversal on the HRMS system.

• Use the HR Menu and choose the attendance tab in the HRMS system.
• Choose the 'Transactions' tab and under it, click on Leave Management and then the LOP Adjustment tabs. Choose add ‘New’ tab to add any new record, including LOP records.
• Enter the code for the employee and click on the ‘fetch’ or ‘Get’ records tab.
• Next, choose the 'Method' to be applied, which allows you to specify whether it is a Payment or Recovery from the salary.
• Enter details in the Processing Month or the month for which the LOP is deducted or reversed. The tab generally uses the ‘Show’ option to select the number of records to view. Choose suitably.
• Select the incorrect or reversible entry and click on the ‘Add Record’ tab to enter your deduction reversal records. 
• Next, click on the tab to ‘Process’ the record, and the HRMS automatically calculates the recovery or arrears in the account.
• The new record of the payment details will be reflected on the incorrectly reflected page. 
• If you do not want to add the new record, click the ‘Cancel’ button to return to the previously displayed menu.

Here are the main fields you will require to enter:

What is meant by attendance regularisation?

The term attendance regularisation is when the employee can apply for attendance regularization on the HRMS system. The HR Manager needs to either ‘Reject’ or ‘Approve’ the LOP days in salary slip. Normally the HRMS system generates an email to the HR manager concerned whenever such LOP reversals or applications for LOP regularisations are applied for. 

The procedure to be followed is straightforward, such as:

Head to the HR Menu. Click on the menu and select ‘Actionable Items’. 

• Enter the employee details and head to the appropriate LOP record.
• Next, choose whether to ‘Approve’ or ‘Reject’ the application for LOP regularization.
• Depending on the leave status, the reason for regularization, the period involved, from-time and to-time tabs, and the date of LOP are some of the fields you will need to enter. Click on ‘OK’ after you enter the new details.
• A confirmation screen appears to confirm the changes.
• Click on ‘Update’ to save changes to the record or ‘Cancel’ to exit the menu.

Also read: TDS On Salary Under Section 192

Conclusion

The bottom line is that when calculating salary, the LOP in salary slip always detracts from the salary you receive and can affect your next promotion. LOP reversals can help you if you have the entitlement and depends on company policy. It is, thus, important for you and the HR department to track attendance and your leaves systematically.