Employee: An employee is a person who has been employed by a company to do a given task. The company hires the employee after an application and interview procedure determines that he or she is suitable for the position. Once an individual joins as an employee in any organization, he/she must be aware of employee policies, rules and regulations. In order to help you with it, here is a detailed article which covers everything about the salaried employee in India.
A salaried employee is an employee who is getting paid a certain amount on regular basis for the services delivered to the company. Based on the organization, the salaried employee would be paid usually on a weekly, monthly or biweekly basis. The salaried employee will also have various perks apart from pay such as paid leaves, health benefits and much more. If you’re a salaried employee then you must be aware of certain rules and laws that you can avail, which has been discussed in detail below.
Things To Know As Salaried Employee In India
But before getting into all the details, one must be aware of 4 important components which you must be aware of as a salaried employee and they are:
- Understanding Salary
- Employee Benefits
- EPF – Employee Provident Fund
- Income Tax For The Salary Earned
A salary is a type of payment that is paid to the employee by an employer as stipulated in the employment contract. Salary is frequently paid in specified intervals, such as one-twelfth of annual payments in monthly instalments. Salary can also be regarded from the perspective of running a business as the cost of obtaining and keeping human resources for running operations, which is referred to as personnel expense or salary expense.
These salaries paid to the employees are documented on payroll accounts in accounting. A salary is a set sum of money or remuneration paid by an employer to an employee in exchange for services rendered.
Components of Employee Salary
Few components of employee Salary are:
- Basic Salary
- Gross Salary
- NET Salary
- Variable Pay
- Employee Provident Fund
- Professional Tax
- Pre-requisites – Fringe benefits
Employee Basic Salary
The amount of money an employee earns before any extras or payments are deducted is referred to as their basic salary. Bonuses, overtime pay, and any other potential compensation from an employer are not included. The basic pay is fully taxable.
The basic salary, which accounts for 40-45 percent of the total CTC, is the foundation of the salary structure. The basic salary determines other salary components such as gratuity, provident fund, and ESIC. When determining the basic salary, factors such as the employee’s designation and the industry in which he or she works are taken into account.
- Basic Salary Calculator
- Basic Salary Example
- Minimum Basic Salary In India
- How To Calculate Basic Salary From CTC
- How To Calculate Basic Salary Percentage
- Base Salary Vs Basic Salary
- Tax on Basic Salary
- Does Basic Salary Include Tax
- Calculation Of Basic Salary From Gross Salary
- Difference Between Basic And Gross Salary
Employee Gross Salary
A employees gross salary is his/her monthly or annual salary credited to the employee before any deductions are made. In simple terms, gross salary is an employee’s total salary before taxes and other deductions. Also the “gross salary” refers to the whole amount of money earned, not just the money received in cash but also the various benefits provided the employer. Therefore, Gross salary includes components such as basic salary, house rent allowance, provident fund, leave travel allowance, medical allowance, Professional Tax, and so on.
- What Is Gross Salary?
- Components Of Gross Salary
- Gross Salary Calculation
- Difference Between Gross Salary And Net Salary
- Reporting Salary On Taxes
- Gross Salary Calculator
- Gross Salary Vs Net Salary Calculator
- Annual Gross Salary
- Monthly Gross Salary
- Gross Taxable Salary
Employee NET Salary
The total pay which is received by an employee after all tax and statutory deductions such from gross salary is known as NET salary. In simple terms, the total amount which is credited to employee’s bank account after all deductions have been made are known as NET Salary. Basically, NET salary is the take home salary of an employee.
- NET Salary
- Formula To Calculate NET Salary
- Ways To Increase NET Salary
- How To Calculate NET Salary With Example
- NET Salary Components
Employee CTC – Cost To Company
The full form of CTC is Cost To Company. The term CTC is widely used in Indian companies which refers to the total package of an employee. CTC indicates the amount which an employer or organisation spends on an employee annually. The CTC is calculated by multiplying the employee’s salary by the total cost of any supplementary benefits received during the service year.
For example, let’s say the CTC of an employee is 5,50,000. Then the employee income would be 5 Lakhs and other additional 50,000 is paid by the employer towards employee medical insurance, variable pay and so on.
- What is Cost to Company (CTC)?
- Cost to Company Vs Salary
- Cost to Company (CTC) Calculation in Salary
- Components of Cost to Company (CTC)
- What is the expected Cost to Company (CTC)?
- Is Cost to Company (CTC) the same as take-home salary?
- Cost to Company (CTC) Breakup
- Cost to Company (CTC) Benefits in India
- How to make the most of the Cost to Company (CTC) being offered?
- What is the difference between CTC and in-hand salary?
Employee Variable Pay
Employee variable pay is otherwise known as performance pay which is used to reward employees who go above and beyond their job responsibilities to help the organisation achieve its goals of productivity, profitability, and quality. Variable pay is determined using two factors and they are
- Individual performance
- Organisation performance
Therefore, the majority of company-developed schemes feature a target-setting and real salary based on that combination. Variable Pay is usually a percentage of fixed pay and is one of the five basic components of total compensation in any organisation.
- Understanding Variable Pay
- Variable Pay Structure
- Variable Pay Policy
- Types Of Variable Pay
- Tax On Variable Pay
- Fixed Pay Vs Variable Pay
- Is Variable Pay Taxable
- What Is Variable Pay In CTC
- Variable Pay Calculation With Examples
Any employee who has worked in an organisation for more than 5 years, then employees will be provided with Gratuity under the Payment of Gratuity Act, 1972. Gratuity is a kind of reward paid to employees by an employer. In simple terms, a gratuity is a monetary payment made by an employer to an employee in exchange for services done to the firm.
- What is Gratuity
- Gratuity Eligibility
- Gratuity Formula
- How to Calculate Gratuity
- Tax on Gratuity
- Tax Exemptions on Gratuity
- Gratuity Rules
- Gratuity Calculation Chart
- Gratuity Period
- Gratuity Percentage
- How To Calculate Gratuity In Salary Breakup
- Gratuity In Salary Slip
- Gratuity In Salary Structure
Usually, every employer will pay allowances to their employees during the course of their usual work duties. Also based on the type of the allowances, they may be either partially or fully taxed. Any organisation will provide the allowance based on their company policies. Also one must note that the allowances will vary from company to company.
- Salary Allowances Dearness Allowance Government Salary And Pay Commission
- Employee Allowances Taxable
- Employee Allowances Non-Taxable
- Employee Allowances In India
- Employee Allowances Policy
- Employee Allowance List
- Types Of Employee Allowances
- Government Employee Allowances
- What Are Other Allowances In Salary?
- What Is Personal Allowance In Salary?
- What Do You Mean By Allowance In Income Tax?
- Allowances Exempt From Income Tax U/S 10
Some of the common allowances are discussed below:
Employee Dearness Allowance
In India, the Dearness Allowance (DA) is an inflation-adjusted allowance granted to government employees, public sector workers (PSE), and pensioners. To reduce the impact of inflation on people, Dearness Allowance is calculated as a percentage of an Indian citizen’s basic income. Indian employees may be paid a base income or pension, which is augmented by a housing allowance, a dearness allowance, or both. The rules that regulate the DA differ depending on where you live.
- What Is Dearness Allowance In Private Companies
- Variable Dearness Allowance
- How To Calculate Dearness Allowance
- Central Government Dearness Allowance
- Industrial Dearness Allowance
- How DA Is Calculated In Salary With Example?
- Dearness Allowance Components
Employee House Rent Allowance
HRA is otherwise known as House Rent Allowance, which is a portion of an employees compensation that is paid to cover the cost of renting a home. It provides tax benefits to employees for the amount they pay toward their house rent each year. The HRA is available to salaried individuals who live in rented housing. And once can use HRA exemption to lower their tax liability.
- HRA Exemption Calculator to Calculate ones HRA Deduction
- How to Show HRA Not Accounted By The Employer in ITR
- How to Claim HRA
- HRA increased From 24000 to 60000 Under Section 80GG
- How to Show HRA not Accounted by the Employer in ITR?
- House Rent Allowance
- House Rent Allowance Eligibility
- House Rent Allowance Under Section 10(13a)
- House Rent Allowance Rules And Regulations
- House Rent Allowance Calculation
- House Rent Allowance Notification
- House Rent Allowance Rules And Regulations For Central Govt. Employees
- House Rent Allowance Form
- House Rent Allowance Exemptions
- Request Letter For House Rent Allowance
Employee Medical Allowance
Medical allowance indicates a certain amount that is paid to employee by an employer under an allowance. Medical allowance is included in monthly fixed pay and also taxable. Employees are paid medical allowance regardless of whether or not they produce the requisite bills to establish that an expense occurred.
- What Is Medical Allowance?
- Taxability of Medical Facilities and Expenses
- Medical Allowance Vs. Medical Reimbursement
- Medical Allowance Exemption
- Medical Allowance Calculation
- Medical Allowance Notification
- Medical Allowance For Pensioners
- Fixed Medical Allowance Option Form
- How To Stop Medical Allowance In Pension
- How To Calculate Medical Allowance In Salary
- Medical Baseline Allowance Application
- Medical Baseline Allowance
- Medical Report Carers Allowance
Employee Leave Travel Allowance
LTA is otherwise known as Leave Travel Allowance. LTA is provided to the employer by an employee who is on leave from work to cover his or her travel expenditures. LTA is one of the important employee’s compensation because it is free from income tax under the Income Tax Act of 1961.
The LTA tax exemption, on the other hand, does not apply to other travel expenses such as eating, shopping, or anything else. Furthermore, the LTA exemption does not apply to families with more than two children.
- Leave Travel Allowance Policy
- Leave Travel Allowance Cash Voucher Scheme
- Leave Travel Allowance Bill Format
- Leave Travel Allowance Section 10(5)
- Leave Travel Concession Under Section 10(5) of Income Tax Act
- Leave Travel Allowance For Central Government Employees
- How To Claim Leave Travel Allowance
- What Is Leave Travel Allowance In Salary
- Leave Travel Allowance Eligibility
Employee Conveyance Allowance
Conveyance allowance is otherwise known as Transport allowance. Conveyance allowance is a sort of allowance which is provided by the employer to an employee of a company to cover the cost of their travel from home to and from work. Employees are typically given allowances on top of their basic salary, which may or may not be taxable under the Income Tax Act.
In general, an employer pays a conveyance payment only if the employer does not supply transportation. Employees will not receive a conveyance allowance if their company provides office transportation.
- Conveyance Allowance In New Tax Regime
- Conveyance Allowance Deduction Rules
- Special Conveyance Allowance
- Conveyance Allowance Exemption Limit For Ay 2021-22
- Conveyance Allowance For Disabled Employees
- Conveyance Allowance Eligibility
Books and Periodicals Allowance
Employees may be given a books and periodicals allowance to assist them in meeting the costs of purchasing books, periodicals, and newspapers. It is tax-free to the extent that actual expenses for books and magazines are incurred.
- Books And Periodicals Allowance
- Books And Periodicals Allowance Rules
- Books And Periodicals Allowance Under Income Tax Section
- Books And Periodicals Allowance Limit
- How To Claim Books And Periodicals Allowances
- What Is Books And Periodicals Reimbursement
Perquisites, often known as fringe benefits, are perks that some employees receive as a result of their job position. These are typically non-cash benefits that are provided in addition to monetary compensation. Provision of a car for personal use, rent-free housing, payment of a personal accident insurance premium, and other benefits are examples of perquisites. The monetary worth of perquisites is added to the salary, and the employee is responsible for paying tax on them.
- What are Perquisites?
- How are Perquisites Classified?
- Taxable perquisites
- Tax-free perquisites
- Perquisites taxed by employees
- Who Pays Perquisite Taxes?
- How are Taxes on Perquisites Calculated?
- Tax Exempt Perquisites
The full form of ESOP is the Employee Stock Ownership Plan which is a type of employee benefit plan that gives employees a share of the companies ownership. Employee stock ownership schemes come in the form of direct shares, profit-sharing schemes, or incentives, and the employer has ultimate control over who is eligible to participate. Every organisation will have to establish certain rules and restrictions that they should follow while awarding the Employee Stock Ownership Plans to their employees.
- How ESOPs work?
- ESOP and Other Forms of Employee Ownership
- Benefits of ESOPs for the employers
- Problems related to ESOPs for the employers
- Why Company offers ESOPs to their employees?
- ESOPs from an employee’s perspective
- Tax Implication of ESOPs
ESPP – Employee Stock Purchase Plan
Employee Stock Purchase Plan, in short, known as ESPP is a corporate-run programme that enables the employee to buy the stocks of the company at some discounted price. Any employee can contribute to the plan and the deductions will be made from their pay. The company uses the employee’s accumulated funds to buy stock in the company on behalf of the participating employees on the purchase date.
- Employee Stock Purchase Plan Tax
- Employee Stock Purchase Plan Calculator
- Employee Stock Purchase Plan Example
- Employee Stock Purchase Plan Home Depot
Employee benefits play a huge role along with any competitive package or CTC. Employee benefits cover everything right from Law mandated insurance to paid leaves. Also one must note that the employee benefits vary from one organisation to another.
Indian law contains several provisions intended to protect the rights of employees. However, there are no particular laws governing private employment in the country. But the 5 most important benefits which appear to apply for all organisations are discussed below:
- Employee Agreement
- Leave of Absence
- Workplace Security
- Maternity Benefits
- Provident Fund
- Objectives Of Employee Benefits
- Unique Employee Benefits
- Importance Of Employee Benefits
- List Of Employee Benefits
According to the Indian Contract Act of 1872, before the commencement of the work period, both the employer and the employee must sign a written agreement on the employment. This agreement plays a major role which outlines the terms and conditions of the job. This employee agreement is otherwise called an Appointment letter.
The agreement list downs everything about the rights and obligations of both employee and employer and is intended to provide both protection and security. Most private employers in India are obligated by the terms and conditions stated in the letter of appointment delivered to the employee.
Also, the agreement describes everything from healthcare benefits to paid time off on the appointment letter, and it serves as the foundation for the agreement between the two parties. So that any employee can know the list of rules, benefits from the appointment letter before joining the company.
- Employee Agreement
- Appointment Letter
- Components of Appointment Letter
Leave of Absence
Any organisation must disclose the leave policy to their employees. The leave policy of the organisation varies from one to another. Some of the common types of leaves which the employer appears to offer are:
1. Employee Sick Leave
Sick leave is the paid time off that an employer provides to allow employees to recover from illness and care for their health. Sick leaves are critical because they allow employees to rest without fear of losing compensation. Sick leave is one of the legal requirement to ensure the employee’s health.
Most of the employers provide a minimum of 15 days of sick leaves annually and again it varies from one organisation to another. Also, many organisations have the policy of carrying forwarding sick at the end of the year, if the employee hasn’t made use of it.
- Sick Leave Policy
- Employee Sick Leave Email Format
- List Of Sick Leave Reasons
2. Employee Casual Leave
An employee takes casual leave for reasons such as travel, vacation, rest, and family activities. These leaves are offered to employees to allow them to take time off for any life events they may have, such as travelling to another country or attending weddings. Allowing employees to take paid casual leave when needed will help them to prioritise their personal lives while still feeling valued at work. Employees at most firms are only allowed to take 8 to 15 days of casual leave per year.
- Employees Casual Leave Rules
- Employee Casual Leave Format
- List of Casual Leave Reasons
3. Public Holidays or Government Holidays
Any holiday which is mandated by the government is known as a public holiday. According to the Indian Government, any institution, including schools, banks, government offices, and even private organisations, must respect these holidays.
Some of the public holidays in India are Independence Day, Memorial Day, Labor Day, bank holidays, and any other nationally recognised day, such as the death of a significant leader of the country.
Do You Know?
India has the highest number of public holidays when compared to other countries. In India, more than 21 working days are declared as public holidays.
- List of Public Holidays
- Public Holiday Rules
4. Religious holidays
Christmas, Eid, Easter, Holi are some of the religious holidays which are important to any employee. Considering this in mind, few organisations do provide the choice of taking time off on the festival day based on the employee religion.
- List of Religious Holidays
- Employee Religious Holiday Sample Email
5. Compensatory leave
Compensatory days off are available to employees who have worked more hours than they were required to. A compensating day off, or “comp off,” is provided to any employee who has put in additional time or came to work on days when they were off such as non-working days.
6. Bereavement leave
Employees take unplanned leave when they lose a loved one, which is an unavoidable scenario. Considering this in mind, many employers do have a bereavement leave policy that allows employees to grieve, manage any duties they may have as a result of the death, and request bereavement leave without difficulty. Depending on the closeness of the relative, most organisations provide 3 to 7 days of mourning leave to their employees.
7. Unpaid Leave
Unpaid leaves are the leaves that an employee can take if he/she doesn’t have any leave balance. When an employee goes under unpaid leave, then the unpaid leave taken during the year that is not paid will result in a salary reduction for the employee.
8. Sabbatical leave
Sabbatical leaves are simply a “break from work” allowing employees to pursue personal interests or take time off for physical or mental health reasons. Sabbaticals, unlike other leaves, are extended periods of time off, ranging from six months to a year. Sabbaticals are frequently taken by employees at educational institutions, where professors may wish to take a break from teaching in order to do research for a project.
Employees who have worked for a company for more than three years are frequently given sabbatical leave as a reward for their dedication and hard work.
9. Paternity Leave
New fathers – husbands or partners of pregnant women, surrogate parents, or adoptive parents – are offered paternity leave to care for their newborns without stress. In contrast to maternity leaves, new fathers often receive two weeks of leave to care for their child after delivery. New fathers in some countries are intended to 1 to 2 weeks of paternity leave. However Paternity leaves are not mandated by law, and this the reason companies rarely provide paternity leave for the birth of their child.
- Paternity Leave Vs Maternity Leave
- Paternity Leave Policy
- Family And Medical Leave Act
- Paternity Leave Rules
According to the Maternity (Amendment) Bill 2017, the Maternity Benefit Act of 1961 safeguards women’s employment during pregnancy and entitles them to a maternity benefit’ – a fully paid leave of absence from work – to care for their kid. Any company having more than 50 employees are subject to provide Maternity Benefits to the women at their workplace.
However, to claim maternity leave, women should have worked as an employee for more than 80 days in the particular organisation.
- Maternity Benefit Act
- Eligibility For Maternity Leave
- How To Apply For Maternity Leave
- Maternity Leave In Private Sector
- Maternity Leave Policy
- How To Calculate Maternity Leave Days
- Maternity Leave For Men
It is the obligation of the employer to ensure that employees are protected from various forms of harassment while on the job, particularly female employees. According to the Sexual Harassment of Women at Workplace Act of 2013, all cases of sexual and mental harassment, regardless of the employee position is a punishable offence.
According to the Indian IPC sections, sexual harassment is a crime punishable and the law requires businesses to develop a policy that forbids it. This policy is frequently included incorporate service standards aimed at promoting a healthy working environment for employees. To reasonably identify such offences, internal complaint committees are established in all offices, institutions, and other establishments. And this is one of the important benefits which an employee should look for, before joining the organisation.
- Workplace Security Policy And Procedures
- Workplace Security Tips
- Workplace Security Checklist
- Workplace Security Awareness
- Sexual Harassment In The Workplace Policy
- Workplace Harassment
EPFO – Employee Provident Fund Organisation
EPFO is otherwise called as Employees Provident Fund Organisation which is also a non-constitutional organisation. The main objective of EPFO is to encourage employees to save some money for retirement. There are namely 3 schemes under EPFO and they are:
- Employees’ Provident Funds Scheme 1952 (EPF)
- Employees’ Pension Scheme 1995 (EPS)
- Employees’ Deposit Linked Insurance Scheme 1976 (EDLI)
- Types of EPFO Scheme
- EPFO Scheme 1995
- EPFO Scheme 1992
Objective of EPFO
The main objectives of EPFO are discussed below:
- To make sure that each employee only has one EPF account.
- Ensure that organisations adhere to the EPFO’s laws and regulations on a regular basis.
- To assure the reliability of online services and to improve their capabilities.
- Encouragement and promotion of voluntary compliance.
Employees’ Provident Funds Scheme 1952 (EPF)
The Employees’ Provident Funds and Miscellaneous Act, 1952 is one of the main schemes when compared to other schemes. EPF is otherwise called a retirement benefit schemes which is maintained by the employees. Both the employee and the employer contribute 12% of the employee’s basic salary and dearness allowance to the EPF account the employee. Out of 12% employer contribution, 8.33 percent of the employer’s contribution is allocated to the Employee Pension Scheme (EPS).
- Understanding EPF
The employer’s total contribution is split between the Employees’ Pension Scheme and the Employees’ Provident Fund, with 8.33 percent going to the Employees’ Pension Scheme and 3.67 percent going to the Employees’ Provident Fund. The employee’s contribution is applied entirely to the employee’s provident fund. Apart from the contributions already made, the employer must contribute an extra 0.5 percent to EDLI.
Refer to the table below to know the employee and employer contribution towards the EPF account.
||% of Contribution
|Employee||12% or 10%|
EPF Eligibility Criteria
The officials of EPFO have set certain eligibility criteria and they are
- If a company employs more than 20 people, it is required by law to enrol in the EPF plan.
- On a voluntary basis, businesses with less than 20 employees can join the EPF plan.
- The EPF scheme’s requirements apply to the entire country of India (save for the states of Jammu and Kashmir).
In order to create an account in EPF, one must register online at EPFO. One must note that employee cannot create an account in EPFO and only the employer can create an EPF account.
Any employee can go to EPF’s member website, EPF e-SEWA/EPF Members Portal, and log in using UAN on the right side of the page. One must note that UAN should be activated before logging into EPF account.
- How to Get Information About EPF Balance, Annual Statement, SMS, E-Passbook?
- EPF Interest Rate
- EPF Change Online, Name, Date of Birth, Gender
- How to Find your Employer’s EPFO Office, EPFO Office Phone Numbers, Exemption Status
- EPF Claim Rejected
- How to Correct EPF Details like Name, Father Name, Date of Joining?
- EPF Balance SMS Check: Service Number, ER, EE, EPF Calculation
- EPF Form 15G Download
- EPF Nomination
- EPFO New Revised Form 11 Personal Details
- How To Transfer EPF Account Online
- EPFO Mobile App Service
- EPF Calculator Method II – What is an EPF Calculator?
- EPF Withdrawal Before Five Years, Form 15G, TDS And ITR
- EPF Certificate of Coverage for Those Going to Work Abroad
- EPF Calculator: Pension Calculator, How PF Is Calculated Online?
- What Happens To EPS When You Transfer Your Old EPF To New Employer
UAN – Universal Account Number
The Universal Account Number is a 12-digit number that is assigned to each member of the Employee Provident Fund. The EPFO UAN is issued by the Ministry of Employment and Labor of the Indian government.
This number remains constant throughout an employee’s career. If an employee changes jobs, EPFO will assign him a new member ID; however, his UAN will remain the same because it is connected to all member IDs. As a result, this number allows you to keep track of your total EPF contributions for both your prior and current employers in one window.
- EPF UAN Correction
- UAN Password Forgot
- 2 UAN Numbers: How To Merge Two UAN EPF Accounts Online?
- View EPF UAN Passbook
- E-KYC Portal of EPF Link UAN With Aadhaar Without Employer
- How Can an Employee Update the Date of Exit in EPF in UAN Himself Without an Employer?
Employee Income Tax
As soon as the income tax filing season begins, the salaried class becomes enraged about the taxes they must pay for the current financial year. It’s critical to understand your tax bracket and what each component of your salary implies. This might assist you in determining ways to save money on taxes.