- A salary slip, also known as a pay slip, is a document containing an employee’s salary details, including basic pay, bonuses, deductions, etc., given to the employee by the employer each month. The recipients are either given hard or soft copies and sometimes both.
- All organizations do not give salary slips out. Smaller size companies don’t usually provide their employees with monthly pay slips. In this case, if employees want to receive monthly salary slips, they can request their HR to do so or get a salary certificate.
- We highly advise that you keep your payslips safe because they can come in handy as there are times when you will have to provide them.
- The format of a salary slip differs depending on the organization or country.
Format of A Salary Slip
Salary Slip format: A salary slip must contain the following:
- Name of the company
- Company’s logo
- Name of the employee
- Employee’s designation and department
- Employee’s ID number
- Employee’s PAN/Aadhaar number
- Employee’s bank account number
- Employee’s Provident Fund account number
- Number of leaves taken by the employee
- Effective workdays of the employee
- UAN (Universal Account Number)
- Earnings and deductions
- Gross and net pay
Importance of Salary Slips
Salary slips are pretty crucial in the world of work. They are legal proof that you are a salaried employee. So, it would help if you always kept them safe as you would other important documents.
Here are some of the reasons why it is important to keep your pay slips safe:
- To prove that you are a salaried employee
Suppose you want to apply for a visa or to universities. In that case, you need to provide a document that shows proof of employment. This is when your salary comes in handy. This will show them your designation and your last drawn salary.
- To avail loans/credit cards
When applying for a loan or credit card, the bank or creditor needs to be assured that you have a concrete plan and a way to pay them back. Your salary slip can act as proof that you have a valid income to pay them back every month (or the payment plan chosen by you).
- To negotiate salary
When changing companies, salary slips are your weapons during salary negotiation. You can ask for a salary hike based on your last payslip. Moreover, bear in mind that the HR person of the new company you are about to join will ask for your salary slips of at least the last 2 months of your previous employment.
- To help calculate income tax payment.
As your salary slip contains components such as house rent, travel, medical allowances, among others, You can use it to prepare the income tax returns. It helps you in calculating who much to be paid and how much can be reclaimed.
Components of a Salary Slips
Each month employees receive their salary statements which the employers make. Although most of the companies give them out via emails, some companies still give out hard copies. If you look at your salary slip(s), you will see many components, all of which you probably won’t understand, but worry not, we will cover them here.
Components of a salary slip can be understood in two parts: Let’s look at the common components of pay slips.
Income
The following salary slip components appear under the incomes part of the salary slip:
1. Basic Salary
It is the amount paid to the employees before any increase or reduction in the salary due to overtime, allowance or bonus. It is also known as base pay, which is the initial rate of the compensation excluding the extra lump sum.
2. House Rent Allowance (HRA):
One of the essential salary components that the company pays its employees to meet their accommodation requirements while living on rent. It is applied to both salaried self-employed workers.
3. Leave Travel Allowance:
Leave travel allowance is an allowance given to the employee by the company for the travel. It covers all the travel costs that are done within the country.
4. Conveyance Allowance:
Conveyance allowance is also known as transport allowance, which is given to the employees of an organization for the travel from their residence to the workplace.
5. Variable Allowance:
Variable allowances are given to employees when they have reached or go beyond their goals.
6. Medical Allowance:
Medical allowance is a fixed allowance that is given to the employees every month, even if they submit the bills for reimbursement or not. However, the payment is made to employees instead of certain medical bills given by them.
7. Personal Allowance:
The amount of income that every individual is permitted to acquire free of tax each year. It is calculated based on:
- Gross salary, variable, CTC, deduction in total, and net pay
- Gross pay is total pay before the deduction and taxation
- Basic salary (40% of CTC)
- HRA (20% of basic)
- DA (50% of basic)
8. Special allowance:
It varies from organization to organization. In many companies, special allowances are given to employees to meet their specific needs regarding their performance in the office. In simple words, it is a fixed amount given to employees above the basic salary to meet their needs.
Deductions
The following salary slip components appear under the part of the deduction of the pay slip:
1. Provident Fund (PF):
PF is the savings tool for employees in an organization. It is a scheme that most companies manage under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The Employees Provident Fund Organization manages it. In this scheme, the employee has to pay a fixed percentage of his salary, where the employer contributes an equal amount.
2. Professional Tax:
It is the tax that a state government imposes on every citizen who earns money through any medium. It is one kind of a tax that needs to be paid by each and every individual from their earning income. However, the collected tax varies from one state to another.
3. Tax Deductible at Source (TDS):
It is a certain amount that is deducted when a salary is made. It is made by the person/organization who makes the payment. Whereas the person who receives the payment/income is reasonable to pay the tax.
Salary Slip Formulas
We have mentioned some of these Salary Slip Excel Formats with predefined formulas. It can help to calculate the Gross earnings and deductions.
| Particulars | Formula |
|---|---|
| Taxable Income | Gross Salary – Deductions |
| CTC= Total salary package of the employee | Gross Salary + EPF + Gratuity + Others |
| Gross Salary | Basic Salary + HRA + Other Allowances |
| Net Salary | Basic Salary + HRA + Allowances – Income Tax – Employee’s Provident Fund – Professional Tax |