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Saral PayPack - Glossary

1. Company

Company in business perspective is an institution / organization created by an individual/group of

people to conduct business. As per the companies act, 1956, a company means an institution

formed and registered under The Companies Act, 1956. Since it is an association of persons

constituted to perform business, it must be registered under the above specified act with a

distinct name. A company is a separate legal entity and its constituents are mainly its members

& directors.

The members are said to be the owners of a company but it has to be managed necessarily by

a human agency. Managing a company is done by a group of people called Board of directors

which comprises of Directors. Members can elect representatives to act as Directors in a Boardof Directors.

Registrar of Companies (ROC):

Registrar of Companies (ROC) has been appointed under The Companies Act, to register the

floated companies in the respective states and union territories. ROC also ensures that such

companies comply with statutory requirements under the Act. The ROC deals with the

incorporation of companies, change of name of companies, change of financial year, conversion

of companies from public to private and vice versa, striking off the names of companies and

default action against companies.

2. Branches of a Company

In relation to a company, Branch means, an establishment described as a branch by the

company and carries the same activity (business) as carried by the Head office or registered

office of the company.

3. Employee

An employee is a person hired to perform a job. Employee in the payroll perspective is said to

be a person who is hired to perform certain job and on accomplishing the job receives

remuneration from the employer.

As per the Employees Provident Fund & Miscellaneous Provisions Act, 1952 employee means

any person who is employed for wages in any kind of work, manual or otherwise, in or in

connection with the work of an establishment and who gets his wages directly or indirectly from

the employer, and includes any person.

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is 10% under some exceptional cases. Apart from this, Voluntary contributions are also

acceptable at the joint request of both employer & employee.

Employer Contribution for Provident Fund:

Both employer and employee has to contribute 12% of Basic + DA of employees salary up to a

maximum of Rs. 6,500/-.

The total contribution (12%) made by employer is bifurcated among Pension fund and Provident

fund.

The rates of PF are as follows:

Employee contribution Rate - 12 %

Cutoff amount - Rs. 6,500/- pm

Employer contribution

Towards Pension Fund - 8.33 %

Towards Provident Fund - 3.67 %

Total Employer Contribution Rate - 12 %

Employer is supposed to pay the administration, handling charges etc. at the rates specified

below:

Acc No. 02 1.10 % of Pay towards PF Administrative charges.

Acc No. 21 0.50 % of Pensionable salary for EDLI Contribution.

Acc No. 22 0.01 % of Pensionable salary for EDLI Administrative charges.

12. Rates of ESI

All employees in such factories and establishments getting wage less than or up to Rs.10,000/-

Pm are coverable under the Act.

Employee share 1.75 % of wages.

Employer share 4.75 % of wages.

Employees in receipt of a daily average wage up to Rs.50/- are exempted from payment of

contribution. Employers will however contribute their own share in respect of these employees.

13. Profession Tax Calculation

Profession tax is a state specific tax. Every state will have a specific slab of rates. Depending

on the slab proposed by the Government, employer has to deduct the PT from employeessalary and remit the amount to Government. For example, the PT slab of Karnataka is as

follows:

Karnataka

Sl.No. Min Max Tax

1 0 2999.99 0

2 5000 7999.99 60

3 8000 9999.99 100

4 10000 14999.99 150

5 15000 Max. Value 20014. Payroll Reminders

A reminder in general perspective is a message that helps to remember something. Payroll

reminder is a reminder which helps in reminding the tasks pertaining to payroll. While processing

a large payroll, a HR may not be able to remember all the tasks on own. In such case, HR can

identify the tasks which need to be done periodically and set up a reminder for those tasks.

Payroll softwares provide an option to set reminders for various tasks such as to send pay slips

to employees on specific dates or to remind the employee about the due amount towards a loan

/ advance etc., or to send a note to the employees on special dates etc.

15. Branch Salary Processing


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Many companies will have branches and it depends on the company policy on where the salary

has to be processed. Although a company may have unique payroll policy, statutory

requirements may change. For example, in one branches there might be employees covered

under and in some other branch, the case may not be the same. Coming to Profession Tax, it is

a state specific tax and varies from state to state. If the company has multiple branches in other

states then PT calculation varies to a great extent.

Despite having multiple branches, many firms choose to have central salary processing. This is

mainly because; one will have control over transfer of information. The other reason is statutory

requirement, as the Provident Fund report for whole company is expected as one report. Since it

is very difficult to manage salaries of very big organizations centrally, salaries can be processedbranch wise.

16. Salary Heads

Salary of an employee is constituted by salary heads. The salary heads can be broadly

categorized in to two types. One is earning heads and the other is deduction heads. Basic, DA,

HRA, Conveyance, Allowance etc., form the earning heads. Deductions like PF, ESI, PT & TDS,

EMI for a loan etc., form the deduction heads.

17. Salary Structures

In a company, all the employees are grouped and segregated in to different categories. The

salary of employees in different groups varies from one to another. There may be 4 earning and

4 deduction heads for one category. And for another category, there may be 6 earning and 5

deduction heads.

The earning & deduction heads comprises of salary structure. For each group or category, there

may be a different salary structure.

18. Salary Rate

Salary rate is a fixed rate defined for paying the salary to employees. It is a fixed amount based

on which the earned salary is derived.

Consider an example where the employees salary is Rs. 5,000/-. If the employee has 2 days of

LOP, the salary for 2 days has to be reduced in the total salary. 2 days salary would come up

to Rs. 334/-.

5,000/30 days = 167167 * 2 days (LOP) = 334

5,000 334 = 4,666

Here Rs. 5,000/- is the salary rate and Rs. 4,666/- is the salary earned.

19. Attendance Calculation

Attendance in general perspective means, the act of being present. While processing the payroll

of an employee, no. of days attended by employee is calculated. Based on the no. of days

attended, the salary of employee can be derived.

20. Types of Attendance

Generally, employees attendance can be of 2 types.

1. Daily Attendance: This type of attendance is for the employees who are working on Daily

basis.

2. Hourly Attendance: This type of attendance can be for employees who are working on

hourly basis.

21. HR Details of an Employee

Employees are the most valuable assets of an organization. Human Resource Management is a

strategic approach to the management of employees. As a part of HR Management, a HR

Personnel is supposed to record and keep update the details of employee from time to time. HR

Details of an employee has to be handled in two ways.

At the time of recruiting an employee HR must ensure the details like personal, academic

qualification, previous experience, family, extra curricular activities details etc. pertaining to the


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employee.

After joining, a HR personnel must take care of recording the details such as changes in

designation, performance appraisal, transfer/onsite details, training attended, compensation given,

disciplinary actions taken etc. of each employee.

22. Company Holidays

Considering the statutory requirement, there are certain holidays which are to be given for

employees. However, most of the companies usually would volunteer to give a holiday on

Foundation day or Founders day. While some companies declare it as a holiday and some

companies make it as a non working day by conducting the celebrations like, cultural activities

and prize distributions etc. Again, it all depends on Companys policy.

23. Weekly Holidays

Weekly holiday is the weekly off provided for employees. Organizations usually do consider

Sunday is a weekly holiday. For some corporate organizations, MNCs etc., who follow 5 days

week method, Saturday & Sunday are considered as weekly off. For some companies who hire

employees on shift basis, rotating weekly holidays are provided.

24. Leaves and Types of Leaves

Leave is the period of time which an employee is absent from work or duty. Organizations do

provide its employees with some leaves, using which employees can take off. There different

types of leaves given by employers to its employees.

1. Earned Leave (EL)2. Casual Leave (CL)

3. Sick Leave (SL)

4. Maternity Leave (ML)

5. Paternity Leave

6. Personal Leave of Absence

7. Bereavement Leave

8. Paid Holidays (Public Holidays)

9. Weekly Holidays

25. Leave Management

In payroll processing, employees leaves play a major role, as the salary calculation is based on

employees present days. While managing the leave details of employees HR personnel has to

take care of recording the opening balance, no. leaves allotted, availed, lapsed, closing balanceetc.

26. Allotment of Leaves

Companies give leaves to employees, most of them are defined statutorily. Other leaves are

given considering employees welfare. Most of the times, some leaves are given after considering

the union request or demand. There are various practices for allotment of eligible leaves. Some

organizations allot leaves before the year begins and some allot before the month start. Some

organizations follow different types of allotment rule for different types of leaves.

27. Leave Register

Leave Register is a register which holds the leave details of employees in a company.

28. Overtime

Overtime can be defined as working beyond the normal working hours. It is the work done in

addition to the regular working hours (usually 8 hrs or as defined by company rules) by anemployee. For working overtime, in return, employee will get compensation by way of cash or

compensatory off.

29. Salary Advance

Salary advance means to pay the amount (salary) before it is due. In some organizations,

employees are provided with this facility of advance for festivals etc., Salary Advance is given

under different names, such as, Festival Advance, Vehicle loan advance etc. The amount paid

as advance is recovered from employees salary.

30. Payroll Loan

Loan is temporary aid of finance provided to the employee that must be repaid in certain time

along with interest. Organizations with a tie up with other financial institutions can make

arrangement for loans to its employees. For which, employee has to give a standing instruction


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to repay the loan amount with interest from salary every month. Loans can be given for

purchasing a house, car etc.

31. Insurance

Insurance is an agreement / contract made between two parties in which one party agrees to

compensate another party for any contingent loss or damage occurred. Insurer is a company

selling an insurance policy. And Insured is the person or entity buying the insurance.

Insured person has to pay some amount of premium for which in turn the Insurer will pay the

loss amount in case of any damage or loss occurred (if any in future).

32. Group Insurance

Group insurance is an insurance policy offered for a group of people (such as Employees of a

company) at a reduced rate. The premium amount to be paid can be cut from employees salary

and paid to the insurance company.

33. Salary Saving Scheme (SSS)

The Salary Saving Scheme popularly known as SSS, provides an easy and convenient way to

save some amount every month on a regular basis under a scheme. Employees can make

arrangement with their employer to pay the premium amount every month by deducting from

salary.

34. Salary Increment

Salary Increment is the process of increasing salary of an employee after certain period of work

in a company. The increment process & percentage differs from one organization to the other.

35. Employee Bonus

Bonus is the amount given or paid in addition to what is usually expected or due. The objective

of this act is to provide for the payment of bonus (linked with profit or productivity) to the

persons employed in certain establishments. Any establishment employing more than 20

employees on any day during an accounting year should pay the bonus to its employees.

36. Salary Exgratia

Ex-gratia payment is more often used in a legal context. It is paid voluntarily, out of kindness or

grace. Exgratia payment is a payment made by giver with out any legal obligation. For the

employees in service industries like Hospitals, social work organizations etc., which work for "No

profit No loss", employees are provided with Exgratia. For the payment of ex-gratia, there is no

ceiling and also the % may get varied from year to year and is purely at the discretion of the

management.

37. Monthly Salary Calculation

Salary is a form of payment made at regular intervals (monthly / daily / weekly) from an

employer to their employees. Salary is the compensation paid to an employee for the work

done. Salary calculation is a process of arriving at an amount as Salary for an employee after

considering the attendance, salary rate etc. by the employer.

38. ESI Applicability change

ESI applicability change is needed when the employees salary crosses the eligibility limit of ESI.

For example, an employee has joined the company in the month of April with a salary of

Rs.7,000/- Pm. As per the rules of ESI, an employee who is getting salary less than Rs.10,000/-

are eligible for ESI. So, the employee is covered under ESI. If the employees salary got raised

to Rs.11,000/- in the month of August. In such case, the ESI applicability must be changed.

For ESI, April to September is considered as First half and October to March is considered as

Second Half. Although, employees salary crosses the eligibility amount in the mid of the year,

ESI contribution must be continued till the end of that particular half.

39. Supplementary Salary

Supplementary salary is the amount paid for the employees as an adjustment or arrears other

than regular salary. It is not a regular salary but is given as an adjustment of salary. Usually,

supplementary salary comes in to picture, when an employee gets some rise in the salary and

the increment amount is paid in the latter months.

40. Tax Deduction at Source

TDS means Tax Deducted at Source. In payroll perspective, deducting the employees income


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tax to be paid to the government from salary is TDS. The employer has to deduct and remit the

full tax arising out of employees salary. For this, employer has to make the estimation at the

beginning of the financial year as to what would be the probable income and income tax for

each employee based on the earnings, deductions and investments proposed to be made by

such employees. This total tax is to be deducted from their salaries over the 12 months between

April and March.

41. TDS Declaration

Declaration form holds the investment details of an employee for the selected financial year. It

contains the details of 80C, 80G, 80D, House property details etc.

42. Income Tax Computation

Computation of tax to be paid by an assessee is called Income tax computation. Tax

computation is done based on the salary earnings, deductions, perquisites etc.

43. E-TDS returns

Payment of Tax Deducted at Source (TDS) through online is called as e-TDS returns. This E-

TDS returns has to be done by the employer to the government. An employer is liable to cut the

TDS from employees and pay to the government.

44. Pay Slip

A slip of paper included while paying the salary is called as Pay slip. It records the employees

earnings, deductions, t ax etc. Or in simpler words, it is a basic reference document for

information and transparency on the monthly financials between employee and employer.

45. Salary Sheet

Salary sheet is a record of salary details of all employees in an organization.46. Bank Statement

Bank statement is a summary of transactions that occurred over a period of time pertaining to

an account.

47. Reports on Attendance

Major inputs required for payroll processing is from attendance details. Referring to Attendance

Register, one can consolidate the attendance report. But in Labor incentive providing

organizations, generating attendance report is difficult. Each extra hour employee works has to

be considered as over time. Organizations with multiple doors have change of consolidating

entices at various doors in to one attendance report. When organizations practice shift system,

consolidating the attendance report is difficult. Similarly, it is equally difficult when the company

practices roster system for shift management. A separate team is required to manage and

summarize the attendance details. Now a day, there are hardware instruments like Biometricsinstrument / proximity readers which can manage in/out details and further there are softwares

are available which consolidates them in to one attendance report.

48. PF Forms

PF forms are the forms for claiming the benefits under the Employees Provident Fund Scheme.

Form 13

(revised)

For transferring the PF account of a member from one establishment

to another establishment covered under the act.

Form 14 For financing a life insurance policy out of PF account.

Form 19 For withdrawing Provident Fund dues on leaving service / retirement

/ termination. It is to be submitted by a member.

Form 20 To claim the deceased members PF accumulation. It is to be

submitted by the nominee in the event of death of member.

Form 31 For the use of PF members to avail advances / withdrawals as

provided in the scheme.

49. ESI Forms

ESI Forms for employer include, Registration form, Return of contributions form, Register of

Employees, Accident Register etc.

ESI forms for employee includes, Declaration form, Claim forms, Life Certificate, Dependant

benefits declaration etc.

ESI Forms for Employer

Form 01 Employers' Registration Form


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Form - 01A Annual information of factory/estt submission form

Form 3 Return of Declaration forms

Form 5 Return of contributions

Form 5a Statement of advance payment of contributions

Form 6 Register of employees

Form 10 Abstention verification

Form 11 Accident Register

ESI Forms for Employee

Form 1 Declaration Form

Form 2 Addition / Deletion in Family declaration form

Form 9 Claim form for sickness /TDB/ Maternity

Form 14 Claim form for Permanent disablement benefit (PDB)

Form 15 Claim form for Permanent disablement benefit (PDB)

Form 16 Claim form for periodical payments of DB

Form 19 Claim for Maternity benefit

Form 20 Claim form for Maternity benefit after death of child

Form 22 Claim form for Funeral Expenses

Form 23 Life certificate

Form 24 Dependant benefits declaration

50. Monthly PF and ESI Reports

The employer has to submit the returns of PF & ESI every month to the respective boards.

Monthly PF Reports

12A Consolidated Statement of dues and remittance by 25th of the following month to

which the dues relate.

5 Return of Employees qualifying for membership to the Employees' Provident Fund

for the first time during every month. It has to be submitted within 15 Days of the

following month.

10 Return of members leaving service during the month.

Monthly ESI Reports

1. Monthly ESI

2. Challan

51. Profession Tax [PT] Forms

Monthly Return has to be submitted in Form No. 5A along with the remittance. The PT

contributions amount has to be remitted to the Professional Tax Officer (Respective PTO Circle)

before the 20th of every month.

Annual Return in Form No. 5 has to be submitted to the Professional Tax officer (Respective

PTO Circle) with in 60 days of the expiry of the year (i.e., before 31st May of every year).

52. Annual Census

Annual census is the act of recording information pertaining to each and every individual in a

group of population for a selected period. This is most widely used in the context of recording

the national population in a year.

53. MLWF

MLWF is the short form of Maharashtra Labor Welfare Fund. MLWF is one of the Statutory

Reports which is applicable for Maharashtra State. It is to be submitted to Maharashtra Labor

Welfare Board. The employees are classified into four categories, namely Manager, Supervisor,

Skilled and Unskilled. Based on the category and the wages of the employee, contributions from

employee and employer are kept aside in a welfare fund.

54. Form T


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Form T is a statutory report which shows the wage details of the employees in a company. In

other words, it is the salary sheet, which contains the Attendance, Earnings and Deductions

details of the employees. To keep track of the wages given to the employees, this is maintained

by the employer.

55. Form 16

Form 16 is a certificate issued by the employer to their employees under section 203 of Income

Tax Act for Tax deducted at Source (TDS) from the income chargeable under the head

Salaries. This is issued yearly and original form 16 is required to file individual Tax Returns.

56. Statement of Total Income

Statement of Total Income is a report which shows the details of income, deductions, total

income, tax on total income, surcharge details, Tax payable etc., pertaining to an employee. This

statement of income is issued by employer to their employees for reference. It bears the details

pertaining to Income from salary, VI A deductions, Gross total income, Surcharge, Tax payable

etc.

57. Salary Certificate

Salary certificate shows the salary details of an employee. It is issued by an employer to

employee. In most of the cases, a salary sheet is issued to facilitate the employees in getting

loan from banks or other financial institutions.

58. Salary Arrears

Arrears are paid to compensate the salaries left, which should have been given earlier. Arrears

come in to picture, when the employees gets salary hike in one month but receives the amount

in some other month. In such case, the company is due to its employees and the due amountwhich is paid in later date is called as arrears.

Though the management decides to give a rise in salary, it may take some time to process that

and in such case, the amount due will be paid as arrears on a later date. The arrears feature

will be enabled in the Salary transactions menu, when Arrears option is checked in options

settings screen.

59. Employee ID card

Employee ID card is a proof that states the bearer is an employee of certain company.

Employee ID card contains the details of Employee name, DOB, Employer Logo & Contact

details etc. It can be used to provide as a photo identity proof for Mobile connections or in

opening bank accounts etc.

60. Interest Calculation

Many companies have practice of giving Salary advance to its employees and some

organizations even offer loans to employees on rules that they have defined. Considering the

loan / advance amount given, interest is calculated on these amounts given to employees.

Various methods have been adopted in the industry for calculating the interest.

Some levy Simple interest, some levy compound interest. Some organizations collect the interest

during the final recovery and some have very clear definition. Loan / Advance will be divided

into equal monthly installment at the time of loan sanction process it self. It is important to note

that, if the rate of interest recovery on bigger amounts is less then State Bank of Indias rate of

interest, then the difference is considered as the perquisite to employee and Income tax is

payable on such amounts.

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