Important Terminologies

• Salary:
 “Salary means an amount or remuneration paid
to the employees mainly the clerical or
supervisory staff for the services rendered.”
 It is paid as soon as the period i.e. the
concerned month in which the person has
worked is over.
 Normally it is paid to an employee who is hires
on regular basis or permanent basis
• Wages:
 “Wages means the remuneration paid to the
employees by the employer for the services
rendered”
 It is paid either on hourly basis, daily basis
,weekly basis or piece rate basis.
 The word is used for the remuneration paid to
the blue collar employees
• Gross Salary:
 “Amount paid to an employee, mainly the
officers/ executives or clerical staff members
who are hired on permanent basis to render
their services to the company.”
 It includes basic pay and allowances plus
other benefits and perquisites either paid
monthly or yearly.
• Net salary:
 Net salary means the take Home Salary of an
employee.
 From the gross monthly salary authorised deductions
are made under the provision of payment of Wages
Act 1936.
 The permissible deductions are: Income tax, PF@12%
of Basic + DA, ESIC and professional Tax, Deduction
for absenteeism and fine= Net monthly salary
• Cost to the company (CTC):
The total package offered to the candidate or paid
to an employee which includes the monthly
salary plus the annual benefits like profit
sharing, perquisites like car, telephone, credit
card, insurance and other facilities and
furnished accommodation
Basic+ Allowances+ Bonus+ Perks+ Fringe
benefits= CTC
• Living Wages:
It is the highest amount of remuneration which
includes amenities which citizen living in a
modern society is expected to meet. It
depends on the economy of the country and
the employer’s paying capacity
• Minimum Wages:
An amount or remuneration given to the
employee to meet their basic needs. The
remuneration paid is such that the employee
is able to meet the basic needs comfortably
 Components of Salary
• Salary consists of
1. Basic
2. Dearness Allowance: Variable, Fixed, Percentage
DA( some percent of basic)
3. House rent allowance (HRA): It is compulsory
and is linked to the basic salary, in Maharashtra
it is @10% of basic
4. Allowances: Medical, Transport, Education,
washing etc
 Salary Structure
Basic salary For the Work you do

+ Allowances Need Based

Motivational tool to retain

+ Fringe benefits employees
+ Perks Only to certain class of employees

+ Bonus/ Profit
To gain the loyalty of employees
Sharing
* Incentives may or may not be the part of
salary structure
• Slots of salary group are formed on the basis
of experience, qualifications, age, skills etc.
Top management
VP/GM/AGM/DGM

Middle-level managers

Officers, executives,
management trainees

Technician, Blue Collar

employees
 Salary Slip
• It consists of :
 Name of employee
 Department
 Employee code no.
 Date of joining
 Rank
 Grade
 Earnings
 Authorized Deductions
 Net Salary or Take home salary
 Earnings-A Deductions-B
Under sec.7(2) of payment of wages act, 1936

Basic • Compulsory Deductions

Variable 1. TDS
+ DA Fixed 2. Professional Tax
Percent 3. PF
+HRA: min 10% of basic 4. Employee State Insurance
5. Labor welfare fund
according to Maharashtra
6. Absenteeism fine
Govt act • Voluntary Deductions
+Allowances: CCA, Conveyance, 1. Loans
Medical, Washing, Educational, 2. LIC premium
tea, ad-hoc and special 3. Co-credit society
allowances 4. Union subscription

*Total ( A-B ) = Net salary / Take Home Salary

 Salary Slip Sample
Name Date of joining
Department Grade
Employee code PF No.
Earnings Scale Amount Deductions Scale Amount
Basic Salary 10,000.00 10,000.00 PF 1200.00 1200.00

HRA 2,000.00 2000.00 ESI

Conveyance 800.00 800.00 Professional
allowance
Medical 1250.00 1250.00 TDS
allowance
LTA - - Advance
Special 1100.00 1100.00 Fine
allowance
Bonus 200.00 200.00
Total 15,350.00 15,350.00 1200.00 1200.00
Net Pay= Rs. 14,150.00