How Leave Applications Affect Salary Calculation in Frappe HR

Frappe HR supports two primary categories of employee leave: Paid Leave and Leave Without Pay (LWP). Understanding how these leave types impact payroll is essential for accurate salary processing.

While paid leaves do not affect employee earnings, unpaid leaves directly impact salary calculations and payment days.

1. Types of Leave

Paid Leave

Paid leaves include leave types such as:

• Sick Leave
• Casual Leave
• Privilege Leave
• Annual Leave
• Other paid leave categories

Paid leaves are allocated to employees by the HR team or through leave policies. Whenever an employee submits a Leave Application for a paid leave type, the leave balance is deducted from the allocated quota.

Paid leaves do not reduce the employee’s salary and have no impact on the Salary Slip.

Leave Without Pay (LWP)

When an employee exhausts their available paid leave balance, they can apply for unpaid leave.

In Frappe HR, unpaid leave is referred to as Leave Without Pay (LWP).

Leave Without Pay directly affects salary calculations and reduces the employee’s payable earnings.

2. Important Consideration for Absenteeism

Many organizations assume that marking an employee as Absent automatically reduces salary. However, this is not how payroll calculations work in Frappe HR.

Simply marking an employee as Absent in Attendance does not affect salary calculations.

This is because the absence may be covered by an approved paid leave allocation.

To correctly account for employee absences in payroll, a Leave Application should be created whenever an employee is absent.

3. Payroll Setup for Leave Processing

To ensure leave is reflected correctly in salary calculations, complete the following setup:

1. Create and configure the Employee record.
2. Allocate paid leaves to the employee.
3. Create a Salary Structure for the employee.
4. In the Earnings and Deductions section of the Salary Structure, select the salary components that should be affected by Leave Without Pay.
5. Create a Holiday List (if applicable) and assign it to the Employee record.

4. Working Days Calculation

Working Days in the Salary Slip are calculated according to payroll settings and holiday configurations.

If you do not want holidays to be counted as working days, navigate to:

Human Resources > Setup > HR Settings

Then disable:

Include Holidays in Total No. of Working Days

Holidays are calculated based on the Holiday List linked to the Employee record.

5. Leave Without Pay Calculation

The Leave Without Pay value in the Salary Slip is automatically updated based on approved Leave Applications.

The system considers:

• The employee for whom the Salary Slip is being generated.
• The payroll period covered by the Salary Slip.
• Leave Applications that use a Leave Type marked as Leave Without Pay.

Only approved Leave Applications with a Leave Type configured as Leave Without Pay are included in LWP calculations.

6. Payment Days Calculation

Payment Days determine the number of days for which the employee will receive salary.

The formula is:

Payment Days = Working Days - Leave Without Pay

An increase in Leave Without Pay reduces the number of Payment Days and consequently reduces salary.

7. Impact on Salary Components

If a salary component has been configured to consider Leave Without Pay:

• The component amount will be reduced proportionally.
• The reduction is based on the number of Leave Without Pay days recorded during the payroll period.
• The final Salary Slip amount is adjusted automatically.

Related Topics

• Leave Application
• Leave Allocation
• Leave Type
• Salary Structure
• Salary Slip
• Holiday List
• HR Settings