HR & Payroll Glossary
Clear, jargon-free explanations of every HR and payroll term used in Indian businesses.
Basic Salary
The fixed component of an employee’s salary, before any allowances or deductions. Usually 40-60% of the CTC. PF and ESI are calculated on basic salary.
CTC (Cost to Company)
The total annual cost an employer incurs for an employee — including basic salary, all allowances, employer PF, ESI, and any other benefits.
Gross Salary
The total salary before deductions — includes basic salary, HRA, special allowances, and other pay components. ESI is calculated on gross salary.
Net Salary (Take-Home)
The amount actually paid to an employee after all deductions — TDS, PF, ESI, professional tax, and any other deductions.
EPF (Employees’ Provident Fund)
A mandatory retirement savings scheme. Both employee and employer contribute 12% of basic salary. The fund earns interest and is payable on retirement or resignation after 5 years.
EPS (Employees’ Pension Scheme)
A pension scheme for salaried employees. 8.33% of the employer’s PF contribution goes to EPS. Employees get pension after 10 years of service and age 58.
ESI (Employees’ State Insurance)
A health insurance scheme for employees earning up to ₹21,000/month. Provides medical, maternity, and disability benefits. Employee contributes 0.75%, employer 3.25%.
HRA (House Rent Allowance)
An allowance for employees who live in rented accommodation. Partially exempt from tax under Section 10(13A), subject to conditions.
TDS (Tax Deducted at Source)
Income tax deducted by the employer from employee salary every month and deposited with the government. TDS is based on projected annual income and investment declarations.
Form 16
A certificate issued by employers to employees showing total salary paid and TDS deducted during the financial year. Required for ITR filing.
Form 12BB
The investment declaration form that employees submit to their employer to claim tax deductions under 80C, 80D, HRA, and home loan interest.
Professional Tax (PT)
A state-level tax deducted from employee salaries. Applicable in states like Maharashtra, Karnataka, West Bengal, and Andhra Pradesh. Not applicable in Haryana.
Gratuity
A payment made to an employee who has completed 5 or more years of continuous service. Calculated as 15 days salary per year of service under the Payment of Gratuity Act.
LOP (Loss of Pay)
Leave taken by an employee when their leave balance is exhausted. LOP days are deducted from the monthly salary proportionally.
Full & Final Settlement (F&F)
The final payment made to an employee after resignation or termination — including pending salary, leave encashment, gratuity, and any other dues.
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