A salary slip is an official document issued by an employer to an employee. It contains a detailed description of the employee’s salary components. Earnings like Basic Pay, Transport Allowance, HRA, Leave Travel Allowance, Bonus, Overtime Pay etc and deductions like Income Tax, Loss of Pay, Provident Fund, Insurance etc of a specified time period for which your salary period is defined, usually a month. It may be issued on paper or mailed to the employee or maybe even published online or locally through Employee Self Service. Employers are legally bound to issue salary slips to their employees periodically, as proof of salary payments to employees and deductions made.

Components of Salary Slip

Earnings

Major components in payslip are Earnings, Deductions and Net Pay. A component is Earnings. It carries details about your earnings for any particular time period. Some get a salary slip every month, others every fortnight and many, every week. Earnings are income earned by the employee for the work done during the salary period. Income earned include Basic Pay, Transport Allowance, House Rent Allowance, Overtime etc. The following are a few components that usually appear under the earnings/incomes part of the salary slip:

Basic Salary

Basic salary is the base income of an individual. It is a fixed part of one’s compensation package. A basic salary depends on the employee’s designation and also the industry in which the employee works.

Dearness Allowance

It is an allowance paid to reduce the impact of inflation on the employee. Dearness Allowance is the cost of living adjustment allowance which the government pays to the employees of the public sector as well as pensioners of the same.

House Rent Allowance

HRA is an allowance paid to employees for house rent paid by them. HRA is based on the location of the rented house and is usually about 40% to 50% of basic salary.

Conveyance Allowance

It is an allowance to cover cost of travel from home to work and from work to home.

Leave Travel Allowance

It is an allowance to cover the cost of travel of employees and their immediate family members while on leave.

Medical Allowance

It is an allowance to cover the medical expenses of the employee while in employment.

Performance Bonus and Special Allowance

It is usually given to employees as a mode of encouragement.

Other Allowances

There may be various other allowances paid by employers to employees for different purposes. They are covered here.

Deductions

Deductions in the salary slip of an employee depend primarily on the company policy and the statutes in the state or country where the employee works. Statutory deductons are what the government or law of the state demands to be remitted from each payslip of the employee. It maybe for the pension fund of employee or insurance etc. Company policies bring in certain deductions like the loss of pay, late-in penalty etc. The following are a few components that usually appear under the deductions part of the salary slip:

Provident Fund

Provident fund is an investment both by the employer and the employee each month, the lump sum amount of which acts as an employee’s retirement benefits scheme.

Professional Tax

It is a tax payable based on the employee’s tax slab and is applicable only in a few states in India.

Income Tax

The tax levied on one’s personal income is called income tax. Usually, an employee gets his or her salary after the tax deduction by the employer. This process is called as Tax Deduction at Source (TDS). The deducted tax amount is paid to the government by the company.

Employee State Insurance

It is another mandatory deduction in the Indian payroll system to assist employees . It is mandatory to employees who earn less than INR21000 in a month.

Loss of Pay

Deduction head which displays the amount of salary deductible due to absence from duty.

Loans/Advances

If you have availed a salary loan or advance from the company, the installment is deducted every month or whichever salary period is applicable and is reflected in the salary slip.

Net Pay

The Net Pay is your take home salary after factoring in taxes and other deductions as applicable. It is obtained after deducting income tax at source (TDS) and other deductions as per the relevant company policy.