The pay cycle in payroll is the period for which the payroll is run. Different organizations choose pay cycles that best their business. Examples of Pay cycles may be from 1 to the last day of the month, 26 to 25, 20 to 19, etc. Now in cases where a salary revision is given not from the beginning of the Paycycle but sometime in the middle of the Paycycle then the salary for the employee will be calculated based on the new salary from the salary effective date and the old salary before this date.
To understand this better, let us take an example of an organization that has a pay cycle of 20 to 19 and for an employee in the month of April they are given a salary revision effective April 1. For ease of calculation let's consider all the salary components are included in the arrear calculation, the old monthly Gross salary is 30000 and the new monthly Gross salary is 35000. The salary calculation for April for the employee will be as follows:
The salary from 20 to 31 March (a):
(30000x12)/31= 11612.9
The salary from 1 to 19 April (b):
(35000x19)/31= 21451.6
Now the Gross salary that is considered for the month of April is a+b= 33064.5
Hope it is now clear on how the salary is calculated when the salary revision is in the middle of the pay cycle. Need more help? You can refer to the other articles available or Contact us!
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