Most of us discuss the information related to remuneration during the salary negotiation round after qualifying for the job interview. After that, the matter is never brought up and employees do not bother taking their payslip in hands to analyze it. They don't even understand the basic terminologies mentioned in the salary stub and just become happy at the pockets loaded with ‘Net Salary'. Many times, working professionals have to pay a bigger price accounting to their confusion, misinformation, negligence or simply due to the lack of awareness.
So, in this article, we will throw some light on the principal elements of a salary slip format and talk a little about each component. Let's take a look at the same:
EMPLOYEE DETAILS
This is the first section of any payslip. It includes important personal and account-related information of the employee such as:
- Name of the Employee
- Employee Code/ ID
- Designation and Department
- Pay Date
- No. of Working Days
- EPF Account No.
- Universal Account No.
- ESI Account No.
- Bank Account/ Cheque No.
EARNINGS:
Basic Salary
It is the base income of an employee which remains common throughout the employment. The different allowances and deductions depend on this component of the salary. So, this is the amount of money that an employee is entitled to receive before any additional payments or deductions made.
Dearness Allowance
DA is a percentage of an employee's Basic Pay to neutralize the impact of inflation on working professionals. So, it is a calculation on the inflation and allowance paid specifically to government employees, public sector workers and pensioners.
House Rent Allowance
HRA is another common factor in the payslip of employees that is offered by the employer to employees living in a rented space and not their own houses. It is given to meet the cost of living. It is calculated by subtracting 10% of the employee's salary from the actual rent paid.
Conveyance Allowance
As the name suggests, this amount is paid out by the company to compensate for the costs incurred by the travel and transportation in reaching the work location from the residence. This part of salary only exists if the employer does not provide a means of commutation to its employees.
Medical Allowance
This is a type of fixed allowance in the salary package that is paid to the employees by their employer to meet basic medical needs. This part of the salary is given irrespective of whether the medical treatment is availed or not.
Special Allowance
This one is an optional component of the salary slip format (depends on the employer's wish). It is a fixed amount given to the employees over and above the Basic Salary for the employees to meet certain requirements.
DEDUCTIONS:
Employees' Provident Fund
EPF is deducted from the employees' salary to go into their own EPF accounts. It is a post-retirement income benefit that makes 12% of the Basic Salary + DA of the employee contributed from both the ends: employer and employee.
Employees' State Insurance
It is another deduction that goes for the health insurance of an employee. A total amount of 4% of the employees' Basic Salary + DA is collected. Out of the 4%, the employer's contribution is 3.25% and the employee's share is remaining 0.75%.
Professional Taxes
It is an indirect tax paid by the employees working directly or indirectly under the State Government of India such as Chartered Accountants, Company Secretaries, Lawyers, etc.
That's all! These are the most common components of any basic payslip in India. If you were unaware of these terms then now, you are good to go!
Author Bio: Amit Kumar is an experienced tech enthusiast and financial advisor and blogger too who is well known for his ability to predict market trends.
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