HR and payroll glossary for India

CTC, or cost to company, is the total annual amount an employer spends on an employee. It is not salary, and the money that reaches the employee bank account each month is always less than a twelfth of it.

Gross salary is the total of all salary components before any deduction: basic, house rent allowance and every other allowance added together.

Net salary, or take-home, is what actually reaches the employee bank account: gross salary minus the employee provident fund contribution, professional tax, employee state insurance where applicable, tax deducted at source, and any recoveries.

Basic salary is the core fixed component of a salary structure, and the base on which provident fund, gratuity and several other statutory amounts are computed.

House rent allowance is a salary component paid towards accommodation costs, and it carries an income tax exemption for employees who actually pay rent.

Special allowance is the residual salary component, used to make a structure add up to the agreed gross once basic, house rent allowance and the named allowances have been set.

Variable pay is compensation conditional on performance, whether individual, team or company. It is included in CTC but is not guaranteed, so it should never be described to a candidate as salary.

Arrears are amounts owed for an earlier period and paid later, most commonly when a salary revision is backdated to a date before the month payroll first reflects it.

A reimbursement repays an employee for money they spent on the company behalf. It is not salary, and it should not appear in a salary certificate as income.

The payroll cycle is the period a salary payment covers, together with the cut-off date after which attendance and changes move to the next month.

The Employees Provident Fund is a statutory retirement savings scheme where both the employee and the employer contribute twelve percent of basic and allied wages each month, under the Employees Provident Funds and Miscellaneous Provisions Act 1952.

The universal account number is a permanent twelve-digit number that stays with an employee across every employer, linking all their provident fund member identifiers into one account.

Employees State Insurance is a contributory health and social security scheme under the Employees State Insurance Act 1948, covering employees earning up to a prescribed monthly wage ceiling, with contributions from both the employee and the employer.

Gratuity is a lump sum an employer pays an employee on exit, under the Payment of Gratuity Act 1972, generally after five years of continuous service, calculated at fifteen days wages for every completed year.

Professional tax is a state levy on income from employment, deducted by the employer and paid to the state government. Twelve states and union territories charge nothing at all, and the Constitution caps it at Rs 2,500 per person per year.

TDS on salary is income tax the employer deducts each month under section 192 of the Income Tax Act 1961, based on the employee estimated annual income and their declared investments and regime choice.

Form 16 is the annual certificate an employer issues to an employee showing the salary paid and the tax deducted at source during a financial year. It is the primary document an employee uses to file their income tax return.

Statutory bonus is a minimum annual payment required under the Payment of Bonus Act 1965 for employees and establishments the Act covers, calculated as a percentage of the wages earned in the accounting year subject to a floor and a ceiling.

Minimum wages are the floor rates of pay fixed by government for scheduled employments, varying by state, by occupation, by skill level and often by geographic zone within a state.

Earned leave is paid annual leave that accrues with days worked, usually carries forward, and is generally encashable on exit. It is the leave type most closely governed by statute.

Casual leave is short-notice paid leave for unforeseen personal reasons, usually taken in ones and twos, and typically neither carried forward nor encashed.

Sick leave is paid leave for illness, usually granted separately from casual and earned leave, and commonly requiring a medical certificate beyond a stated number of consecutive days.

Leave encashment is payment for accrued leave that was never taken, most commonly earned leave paid out in the full and final settlement when somebody leaves.

Loss of pay is a deduction from salary for days absent without any leave balance to cover them. The size of the deduction depends entirely on which divisor the employer uses, and there is no single correct one.

Compensatory off is a substitute day of rest granted to an employee who worked on their weekly off or on a holiday, given instead of, or sometimes alongside, extra pay.

The attendance register is the record of who worked, on which days, and for how long. It is a statutory record for most Indian employers and the source of every figure in payroll.

A muster roll is the statutory attendance record prescribed under Indian labour rules, showing each worker name and their attendance for each day of the wage period in a prescribed form.

Biometric attendance verifies identity at the moment of the punch using a physical characteristic such as a fingerprint or a face, at a device installed at the workplace.

Geofencing draws a virtual boundary around a work location and allows attendance to be marked only from inside it, using the location reported by the employee phone.

Proxy attendance is one person marking another present. It is the specific loss that identity verification exists to prevent, and it is invisible in any system that records only a time and a place.

A shift roster is the published schedule of who works which shift on which day. It is what turns a shift pattern into something staff can plan around and a supervisor can be held to.

A weekly off is the statutory day of rest an employee is entitled to in each week. It is a requirement rather than a benefit an employer grants, and working through it triggers obligations.

Overtime is work beyond the statutory daily or weekly limit, and in India the central labour statutes that prescribe an overtime rate set it at twice the ordinary rate of wages.

A night shift allowance is an additional payment for working overnight hours. It is a contractual benefit in most Indian private employment rather than a central statutory entitlement.

Probation is an initial period of employment during which the notice period is usually shorter and the employer assesses whether to confirm the employee. It is a contractual arrangement rather than a statutory status.

A notice period is the time between somebody giving or receiving notice and their last working day. In India it comes from the contract, from standing orders where they apply, and from statute in the case of retrenchment.

The full and final settlement is the closing calculation when somebody leaves: salary to the last working day, leave encashment, gratuity where payable, any statutory compensation, less lawful recoveries.

Workman is a defined category under section 2(s) of the Industrial Disputes Act 1947, and whether an employee falls inside it decides which protections and which termination obligations apply to them.

Continuous service is a statutory measure of how long somebody has actually worked, counted in days worked rather than in elapsed calendar time. It is what gratuity eligibility and retrenchment protection are tested against.

Standing orders are the certified conditions of employment for an industrial establishment covered by the Industrial Employment (Standing Orders) Act 1946, and where they apply they override conflicting terms in an individual appointment letter.

The Shops and Establishments Act is state legislation governing shops and commercial establishments: registration, working hours, weekly offs, leave, and record keeping. Every state has its own, and they differ.

A salary certificate is a letter on company letterhead certifying an employee current compensation, issued at their request for a bank, a landlord or a consulate.

Why does this glossary have forty-two terms and not a thousand?

Because a one-sentence definition of a word you could have guessed is not worth a page. Every entry here covers pay, statutory deductions, leave, attendance or the exit, and every one of them carries the Indian specifics: which act it comes from, what the threshold is, and the mistake employers actually make. A thousand thin pages would rank for more queries and be worth citing on none of them.

Why is CTC not the same as salary?

CTC is the total annual amount the employer spends on an employee, including the employer provident fund contribution, gratuity provisioning, insurance premiums and often variable pay. Several of those never reach the employee bank account, and some may never be paid at all. The gap between a CTC figure and monthly take-home is commonly thirty to forty percent.

Which of these are national rules and which are state rules?

Provident fund, employee state insurance, gratuity, bonus and the Industrial Disputes Act provisions are central legislation. Leave entitlements, weekly offs, daily hour limits, registration and the prescribed registers come from your state Shops and Establishments Act, and professional tax is a state levy that twelve states and union territories do not charge at all. Each entry says which it is.

Are the amounts and rates on these pages current?

Every entry was checked in August 2026. Where a figure is set by rule rather than by the act itself, such as the employee state insurance contribution rate or a minimum wage notification, the entry says to check the currently notified rate rather than quoting one that may have moved. Where a rule varies by state, it says so instead of presenting one state as though it were national.

Is this legal advice?

No. It is general information for Indian employers, written to be checkable: each entry names the act behind it so you can verify it yourself. It cannot account for your state act, any certified standing orders that apply to your establishment, or the terms of your own contracts. Take professional advice before acting on anything with a statutory consequence, particularly a termination.