Payroll for Manufacturing Plants: Wages, OT and Deductions

Plant payroll is built on attendance. Paid days come from the time office, overtime from approved punches, incentives from the production report and recoveries from accounts. The structure must follow the wage definition in the Code on Wages, PF and ESI apply to most workers, and wages must be paid by the 7th of the following month. The real work is getting every input in by the 2nd so the run is never rushed.

A wage structure that fits the 50 percent rule

Under the Code on Wages, basic pay plus dearness allowance must be at least half of total remuneration. Allowances above that line are added back to wages, which raises the base for PF, gratuity and bonus. Plants that kept basic low and paid a large special allowance should review the split. A workable shop floor structure is Basic and DA at half of gross or more, then HRA and a special allowance, with shift allowance and attendance bonus paid as separate lines. See the wage definition rule.

Worked example: a press operator's month

Anil Jadhav has a monthly gross of ₹20,800: Basic ₹8,320, DA ₹2,080, HRA ₹4,160 and Special ₹6,240. Basic plus DA is ₹10,400, exactly half of gross. The plant uses a fixed 26-day basis for loss of pay, so one day is worth ₹800. This month he has 1 day of loss of pay and 6 approved overtime hours at ₹200 an hour. His earnings are ₹20,800 less ₹800, which is ₹20,000, plus ₹1,200 of overtime, a total of ₹21,200 before PF, ESI and professional tax.

Allowances and recoveries common in plants

Keep every item as a separate line on the payslip. Workers read payslips closely, and a single other earnings figure brings a queue to the HR window on pay day. Recoveries must stay within the deductions allowed from wages and your standing orders.

Night shift allowance for C shifts worked
Attendance bonus for a month with no unauthorised absence
Production incentive from the monthly output report
Canteen and uniform recoveries where the rules permit
Salary advance recovered in instalments
Statutory bonus paid once a year to eligible workers

A month-end calendar that meets the 7th

Paying by the 7th needs a fixed timetable. Attendance corrections close on the 1st, overtime approvals on the 2nd, and the attendance month is finalized that evening. HR adds incentive, advance recovery and canteen inputs on the 3rd, the run moves from draft to review on the 4th, and finance approves the payment batch on the 5th. That leaves a day's margin for a bank holiday or a rejected account number.

How to set it up in ZeniaHR

In Direct Payroll, build each worker's structure from monthly gross, with Basic and DA at half or more, then HRA and Special.
In the deduction policy, choose the loss of pay basis your plant uses, such as fixed 26 days, and whether weekly offs and holidays are paid.
Finalize the attendance month first, so paid days reach payroll frozen and bounded by joining and exit dates.
Add the month's inputs: approved overtime flows in, while incentive, bonus, advance recovery and adjustments are entered as earnings or deductions.
Move the run from draft to review, check payslips for a few workers from each shift, then finalize; finalized runs are sealed.
Create the payment batch, have it approved and marked paid before the 7th, and let workers download payslip PDFs in the app.

Roles this applies to

Industrial Relations Officer Labour Welfare Officer Industrial Relations Manager Plant HR Manager Demand Planner

See payroll for manufacturing plants in a demo

We set up your locations, shifts and rules on a video call and show it running for your team. Free for your first 50 employees.

Book a free demo See pricing

Frequently asked questions

How is loss of pay calculated for factory workers?

Loss of pay is the monthly gross divided by the basis your policy uses, multiplied by the unpaid days. On a fixed 26-day basis, a worker earning ₹23,400 a month loses ₹900 for each unpaid day. Some plants use calendar days or actual working days instead. Choose one basis, write it into policy and apply it to every worker in the plant.

By when must factory wages be paid?

Monthly wages must be paid by the 7th of the following month under the Code on Wages. When a worker leaves for any reason, wages are due within two working days. Plants work backwards from the 7th: attendance closes on the 1st, inputs by the 3rd, payroll review by the 5th and the bank transfer the day after.

Does ZeniaHR calculate PF and ESI for plant workers?

Yes. Direct Payroll calculates employee PF, ESI and state professional tax, and splits the employer PF share into EPS and EPF along with employer ESI. Payslips show each deduction on its own line. Direct Payroll does not compute TDS, so plants with salaried staff above the tax threshold handle TDS separately.