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What is a Pay/Salary Slip?
Another name for Pay slip is Salary slip. In a nutshell, its a proof of your income. If you are in a college, or you are working, or we enter the world of employment by qualifying an exam and joining a company, there is one thing the moment you start working will be given to you every month, the first and foremost discussion will be about it, and that is your Pay/Salary Slip.
You should know what gross salary, allowance, reimbursement, House Rent Allowance (HRA), Provident Fund (PF), insurance etc. You must have read these columns in your salary slip right? then shouldn’t you by now know what they mean. its your salary slip after all, not someone else’s.
This Salary Slip is such a document that you remember only when you apply for another job and the HR asks for it, because on the basis of this, your next offer is decided. However, it is extremely crucial to understand salary slip. Because there are lots of people who think that the CTC divided by 12 months will be our salary. Some people think that they were offered a lot higher, when they received the actual salary, a lot of things got deducted. This is when you must know the difference between gross salary and take home salary. there are times when company offers you 25,000 but the salary credited in your bank account is only 22,000. This is where you get confuse. Where did all the money go? how did it go? for which things do I need to pay my bills and for which I don’t have to? Why is the basic salary so less? It should have been more? Which tax slab do I fall under? So on and so forth.
In today’s article, we will discuss all this.
Whenever you get your offer letter once you join a job, there will be one amount mentioned in your offer letter which is called CTC (Cost to Company). Its very crucial to understand this because lots of people are under an illusion. Lets suppose your CTC is 6 lakhs, you dividing it by 12 will earn you 50,000 per month, and you happen to convey same to your parents, your friends and even to yourself. No! this CTC is important because this is the company’s number. Your number will be different than this- cost to company. The full form itself says the real meaning of it.
What is CTC?
Its an amount that your company directly or indirectly will spend over you every year. In this, naturally, your salary is included, which you will get every month but there are a lot other things included, which you might not get directly or else you might get later.
What is Gross Salary?
Gross Salary is the amount which you get, which the company doesn’t have to indirectly spend on you. This amount is possible closest to the actual amount you will get once you start working in the company. Now this gross salary has lots of components:
- Basic Salary : This is, as the name states, your basic salary. If this number is less, then don’t feel disappointed, this has nothing to do with your capability, your caliber, promotion, your level, whatsoever. This is almost like an arbitrary number. Its such a number, which companies based on their science or formula decide. This number whether higher or lower than your colleague, higher or lower than your expectations, genuinely doesn’t matter at all, Because as per the Government and as per income tax, your 100% basic salary is taxable. Whatever basic salary you get, on the whole amount, the tax will be calculated. You wont be able to make any deduction claim. Basic Salary, on an average is 30-35% of your gross salary.
- House Rent Allowance : If you are a salaried individual then the Government says that the rent you are paying to live in your house, that you can claim as salary or as an income and can get tax benefit out of that.
- Medical Allowance: There used to be the time when we have to claim it, but now you can get them even without claiming. For instance, medical allowance in India is Rs.1250 per month or Rs.15,000 per year. This is towards your medical bills and medical expenses. This is naturally less, but just an allowance that comes in and the Government say that this is the bare minimum that everyone should get.
- Special Allowance : Every company, towards special allowance will have a different perspective. There are some companies which take a very aggressive approach, while some take a very conservative approach. The idea is, that if by the end of the year, company has given special allowance employee, under theses 3 categories and the employee is able to show the proof of those expenditure in the form of bills, then this will be deducted from the taxable income.
Benefits of Salary Slip:
- Loan or Credit card : If you are planning to take home loan, vehicle loan from bank, then you have to show your income proof to the bank. Generally, salary slip is acceptable here. Or to even get a credit card, one has to show the salary slip to the bank.
- Term Insurance : You can only get Term insurance if you have salary slips of last few months available with you. If you are a Businessman, a professional person or a freelancer then you will have to give your 3 year Income Tax Return. But if you are an employed or a salaried person, then your last few month’s salary slip is more than enough.
- Income Tax Calculation : Those who all earning more than Rs.50,000 per month, comes under Income tax. There is a rebate till % lakhs. Earning more than that annually will have you under income tax radar.
- Visa Application : If you are planning to visit a foreign country, they will definitely ask for your salary slip. Specially if you’re travelling to USA, Europe as it is assumed that the person might not have any earning here so chances of him getting settled out there is more, so to confirm his base and earning in the country he is residing, pay slip plays an important role.
- Alimony ground : If the proceeding of divorce is ongoing, the salary slip of husband and wife individually is taken into consideration. Based on their salary slip, the alimony is given to their partner.
- Increment Proof : What all the increments happened at different intervals is something your salary slip is a proof of. That is why it is important to save your every month’s salary slip. When you apply and go for a new employment, there you will have to submit your last salary proof.
Standard Format of a Pay Slip :
In a Pay slip, you can see,
- Personal details (eg: Name, Attendance)
- On the left hand side, Income Reimbursement (earnings)
- On the right hand side, Deduction
- Net Pay will be written
- At the bottom, bank details will be mentioned(eg: bank name, IFSC code etc)
Components of Salary Slip :
Personal Information :
- Full Name
- Father/Husband name
- Address
- Designation
- Employee code
- Grade and ‘rank’ if any
- Mode of payment – bank transfer, cheque, cash
- Details of payment
Attendance Information :
- Present days
- Rest days
- Paid leaves (SL/CL/EL)
- Holidays
- Leave balance
- Overtime hours
- Total Paid Days
Earnings :
- Rate & Earned
- Basic Salary
- Allowances : Dearness Allowance, Housing Rent Allowance, Transport /Conveyance Allowance, Medical Allowance, Leave Travel Allowance, Special Allowance, Ex Gratia, Payment for overtime work, Performance or sales incentive/bonus
- Gross Earned
Deductions
- Tax Deductions
- Social Security/ Provident Fund Deductions
- Workplace/group accident cover deductions
- Medical and healthcare insurance deductions
- Advance payment/ adjustments on loan
E Pay Slip :
As the we are drawn towards online facilities, all the companies, brands and organizations that manage a lot of employees have moved towards online Payroll management systems. In this, every employee will have an employee ID & password by which they will be able to access the Pay slips from online directly. This process of getting pay slips from online is named as E Pay slip or Electronic Pay slip management system. The government sector organization has started using the power of e-Pay Slips to have work done Smoothly and conveniently.
Normally, the Pay slip you receive physically will have stamp and signature but the e-Pay slip will not have any of the signatures or stamp as well, but at the end of the Pay slip there will be a note stating that this will work as original pay slip.
Is Pay/Salary Slip Mandatory?
Your employer must give you a pay slip which shows how much you earned, how much tax you paid, whether you accrued holiday, whether there were any other deductions e.g. pension fund etc. Most countries would have a law that makes it compulsory for an employer to provide this.
Do you have your every month’s Pay slip kept safely with you? Comment down and tell us and also if you have any questions regarding Employee’s Pay slip. If you felt this piece of writing was insightful, then please share it with your friends, family and specially the youth around who will soon be keeping their foot in this world of employment.
Thank you for Reading!