Loss of Pay (LOP) Meaning, Policy & Leave Rules

Loss of Pay (LOP), also called Leave Without Pay (LWP), occurs when an employer allows an employee to take time off from work without paying their regular salary or wages for that period. Therefore, it counts as unpaid leave.

Generally, Loss of Pay (LOP) in salary occurs when an employee has exhausted all available paid leave, such as vacation and personal leave. Hence, they may need to take additional time off due to personal reasons or unexpected circumstances. In such cases, the employer treats the days taken off as unpaid and deducts them from the employee’s salary.

Some of the Key points to understand about Loss of Pay in Salary

Leave Balance(LOP): LOP is usually considered when an employee has used up all allotted paid leaves but still requires additional time off. Subsequently, this results in a wage deduction for the days taken as unpaid leave.
Approval Requirement: Even though LOP is unpaid, employees must obtain formal approval from their manager or HR before taking such leave.
Exceptional Situations: LOP can also be enforced during events like strikes or when an employee fails to report on an agreed compensatory workday. As a result, this situation leads to an absence from work without pay.
Weekend Work Adjustments: If an employee is required to work on a weekend due to poor planning or lack of direction, the absence during regular work hours may still be marked as LOP.

General Leave Rules to Remember Regarding LOP

Clearly state the leave entitlement in the offer letter or employment contract to avoid confusion later.
Ensure the HR or payroll team accurately deducts salary for the days marked as Loss of Pay, as these count as leave without pay.
Reflect the total number of LOP days taken during the month on the employee’s payslip as part of the loss of pay policy for transparency.
If your organization sets an annual limit for LOP days, avoid carrying forward or encashing any unused portion.

Frequently Asked Questions

Q1.	What is Loss of Pay (LOP)?
Ans.	The LOP, or Loss of Pay meaning, refers to unpaid time off taken when an employee has exhausted their employee leave balance but is still permitted to be absent. In the real world, unexpected situations often arise, and when employees run out of paid leave, they use LOP as a practical solution that benefits both them and their employers.
Q2.	Is LOP the same as Leave Without Pay (LWP)?
Ans.	Yes, LOP (Loss of Pay) and LWP (Leave Without Pay) are often used interchangeably. Both refer to situations where an employee takes time off after using up all paid leave. Consequently, this results in a salary deduction for the unpaid days. Whether you call it LOP or LWP, it simply means the employer approves the leave but does not pay for it.
Q3.	How to calculate LOP in Salary?
Ans.	LOP is calculated by multiplying the number of unpaid leave days by the employee’s per-day salary. Here’s the formula: LOP = (Monthly Salary / Total Working Days in the Month) × Number of LOP Days This calculates the amount the employer must deduct from the employee’s salary due to unpaid leave.
Q4.	How does LOP affect salary?
Ans.	LOP directly reduces an employee’s monthly salary. For instance, when an employee takes leave without any remaining paid leave balance, the employer deducts their pay based on the number of LOP days. The more days, the lower the take-home salary for that month.
Q5.	Does LOP impact employee benefits?
Ans.	Yes, Loss of Pay (LOP) can affect employee benefits. Since this lowers the monthly salary, it may also lower contributions to benefits like EPF, ESI, and gratuity. Generally, these are calculated based on the actual salary earned during the month.
Q6.	Can LOP be denied by the employer?
Ans.	Yes, employers can reject LOP reversal requests if the reason for leave doesn’t meet company LOP rules, LOP policy, or lacks sufficient justification.
Q7.	Are there any benefits to LOP?
Ans.	Yes, employees can take unpaid leave without risking their job security, and the policy offers flexibility during emergencies, even when paid leave is exhausted.