How to calculate salary for contract staff (daily and monthly wage)

Contract staff in security, housekeeping, manpower supply and construction are paid in one of two ways: by the day, or by the month. Most payday disputes come from a handful of decisions: how a day is valued, how half-days count, how overtime is priced, and how much of an advance comes off this month. This guide takes each decision in turn, with the rules that apply since the Labour Codes came into force on 21 November 2025, and links to a detailed guide, tool or template for each step.

What is the salary formula for contract staff?

Every month's pay, for every staff member, comes down to the same four steps:

1. Earned wages for the days the person is paid for.
2. Plus overtime for hours beyond the normal working day.
3. Plus other earnings such as an allowance or bonus paid that month.
4. Minus deductions: advance recovery, the staff share of PF and ESI, and any other deduction the law allows.

The only real difference between daily and monthly staff is step 1:

Should contract staff be paid by the day or by the month?

Both are lawful, as long as the pay for the work done is never below the minimum wage notified for that category of work, skill and zone. In practice:

• Construction and casual labour is usually daily-rated, because gangs change from week to week.
• Security and housekeeping staff on long contracts are often given a monthly figure, but many agencies still calculate it from a daily rate.
• Your client billing may be per staff-day even when you pay a monthly salary. Keep the two calculations separate, and do not let a billing convention decide your staff's pay.

Whichever you choose, the Code on Wages, 2019 says no wage period may be longer than a month, and the method must be the same every month. Write it into the appointment letter.

How can you work out a month's salary quickly?

The fastest way to check one person's pay is to put the month's numbers into a calculator that shows every step. Our free staff salary calculator takes the pay type (daily wage or monthly salary), the rate, the salary basis (26 days, 30 days or calendar days), the days present, half-days, paid leave or absent days, overtime hours and advances. It returns the earned wages, the overtime, the advance deducted and the net payable, with the arithmetic on screen.

If the advance is larger than the month's pay, it shows net payable as zero and the amount still to recover next month, instead of a confusing negative figure. You can print the result, download it as Excel, or send it to the staff member on WhatsApp. It works without signing up and without JavaScript, so it runs on any phone. Use it to settle a disputed payslip on the spot, or to check a month before you pay everyone.

Open the free contract staff salary calculator →

Should you divide a monthly salary by 26, 30 or the days in the month?

For monthly staff, everything depends on what one day is worth. Divide ₹18,000 by 26 and a day is ₹692.31; divide by 30 and it is ₹600. Divide by the calendar days and it changes every month. All three pay the full salary for a full month. They differ only when you deduct for an absence or pay for part of a month, and that difference is what staff notice.

For ordinary salary deductions we found no law that fixes one divisor. The 2026 central rules do use 26 in specific places: for valuing a monthly-paid worker's daily wage in overtime calculations, and in the rest-day wage rules. Gratuity also uses 26. The guide works through the same month under each method, explains when each one suits a contractor, and shows how to write the choice into the appointment letter so it is never argued about.

Read the full guide to 26 vs 30 days salary calculation →

How are half-days paid?

A half-day is worth half of one day's pay: ₹350 on a ₹700 daily wage, or half of salary ÷ divisor for monthly staff. The harder question is when you may mark one. Under section 10 of the Code on Wages, a daily-rated worker who works less than a normal day is still owed the full day, unless the shortfall was their own choice (or another case the rules prescribe, such as agreed part-time work). If the client closes the site at noon, that is a full day, not a half-day.

The guide shows the calculation for daily and monthly staff with worked tables. It explains how to tell a late arrival (a full day, marked late) from a genuine half-day, and how to show half-days on the attendance sheet and the salary slip so the cut is visible rather than buried in the arithmetic.

Read the full guide to half-day salary calculation →

How do you deduct advances from contract staff salary?

Advances are where most salary disputes start: cash handed over at a site, written down late or not at all, and recovered in amounts nobody agreed. The Code on Wages allows recovery of advances as a deduction from wages. All deductions in a wage period together, though, cannot exceed 50% of the wages. Under the 2026 central rules, any excess is carried forward and recovered in later months within the same 50% limit.

The guide sets out a simple advance register (date, amount, purpose, recovery plan, signature), a worked example of recovering ₹6,000 over three months inside the limit, and what to do when an advance is larger than a month's pay. It also covers the habits that stop arguments: one person approves advances, a recovery plan before the money goes out, and the balance shown every month.

Read the full guide to handling advances to contract staff →

What are the overtime rules for contract staff?

Overtime is work beyond the normal working day, and the Code on Wages says it is paid at not less than twice the normal rate of wages. The 2026 central rules set the normal working day at eight hours for daily-wage staff. For others, overtime starts beyond 48 hours in a week. For a monthly-paid worker, the daily wage used for overtime is one twenty-sixth of the monthly wage.

The most expensive mistake is the 12-hour shift. Under these rules it is eight normal hours plus four overtime hours at double rate, not one long day at the daily wage. The guide explains which laws now govern overtime (the old Factories Act nine-hour rule is repealed), how part hours are counted, rest-day work, how to record overtime so it stands up, and how to price it when you bill the client.

Read the full guide to overtime rules for contract staff →

How do you calculate overtime pay for one day?

Once you know the rule, the arithmetic is short: daily wage ÷ 8 hours = the ordinary hourly rate; × 2 = the overtime rate; × overtime hours = overtime pay. On ₹800 a day, three extra hours at double rate is ₹600, and the day's total is ₹1,400.

Our free overtime calculator does this at double rate by default. It defaults to double rate, and has an option for a daily wage that covers a 12-hour shift, but shows a clear warning when you use it, because the law still counts hours beyond the normal working day as overtime. The result can be printed, downloaded as Excel or shared on WhatsApp, which is useful when a staff member asks how their overtime was worked out. For a monthly-paid worker, first work out one day's pay (salary ÷ 26 for overtime under the central rules) and enter that as the daily wage.

Open the free overtime calculator →

Which wages register should you keep?

The wages register is the legal record of each wage period: days worked, rate, basic, DA, overtime, other payments, deductions and net amount paid, with the staff member's signature or thumb impression. Since the 2026 central rules under the Labour Codes, employers in the central sphere keep a register of wages, overtime and deductions (Form XV of the OSH rules), electronically if they wish, for five years. Establishments under a state government follow their state's rules.

Our free Excel register follows the familiar column layout of Form XVII from the old Contract Labour Central Rules. It works out basic wages, total and net pay for up to 30 staff, with a totals row. It is a format aid, not legal advice: use it as your working register, and check the exact format your rules prescribe before an inspection.

Download the free wages register template →

What should a contract staff salary slip show?

A salary slip turns the month's calculation into something the staff member can check: paid days, rate, earned wages, overtime, other earnings, each deduction, and net pay. The Code on Wages (Central) Rules, 2026 require employers in the central sphere to issue wage slips, on paper or electronically, on or before the payment of wages, in Form V. That form lists the rate of wages, attendance, overtime wages, gross wages, deductions (PF, ESI, others) and net wages paid.

Our free Excel salary slip carries the same items. It works for daily or monthly staff, prorates a monthly salary on calendar days, prices overtime at a multiplier you choose (2 by default), and has a line for the advance balance still to recover. Fill one copy per staff member, then print it or send it as a photo on WhatsApp.

Download the free salary slip format →

Which deductions can you make from wages?

Section 18 of the Code on Wages, 2019 says no deduction may be made from wages except those the Code authorises. The ones contractors use most:

All deductions together, in any wage period, cannot exceed 50% of the wages. If they would, the 2026 central rules say the excess is carried forward and recovered in later months, still within 50% each month.

When must contract staff be paid?

Under section 17 of the Code on Wages, monthly wages must be paid by the 7th of the next month. Daily wages are paid at the end of the shift, weekly wages on the last working day of the week, and fortnightly wages before the end of the second day after the fortnight. If a staff member leaves, is removed or dismissed, their wages are due within two working days.

Late payment is a common source of complaints to the labour department. Plan the month so attendance closes on the last day and salary is worked out in the first few days, not the second week.

What does a full month look like, start to finish?

Vijay is a daily-wage security staff member at ₹700 a day. In July he was present 22 days, had 2 half-days, worked 4 overtime hours, and is repaying a ₹2,000 advance this month. His wages are within the ESI limit.

Deductions here are ₹2,126, well inside the 50% limit of ₹8,400. PF is left out to keep the example simple. If Vijay is covered, add the PF staff share at the current rate. Check whether ESI is worked out on wages including overtime with your CA.

Which salary mistakes cost contractors the most?

• Wrong attendance. Every rupee of salary comes from a day on the muster roll. A tick on the wrong row pays the wrong person. See our guide to contract staff attendance.
• Single-rate overtime where the law requires double, especially on 12-hour shifts.
• Changing the divisor from month to month, or using different ones for joiners and leavers.
• Taking the whole advance at once, beyond the 50% limit.
• Paying late, after the 7th of the next month.
• No salary slip, so the staff member cannot check the numbers and assumes the worst.