- What is a Salary slip?
- How to apply for a Salary slip.
- Importance of Salary Slip.
- Components of salary slip
- Payslip Format?
- Types of Payslips
- Legal Validity of Manual & Digital Payslips
- What do you understand by Salary Certificate? How is it different from a salary slip?
Usually terms like Salary slip, Salary certificate & Monthly payslips seem quite confusing. Ever wondered why HR stresses upon salary slips from your previous employer? Well, in this blog we shall help you get a detailed idea about importance of salary slips & how can they be a useful pillar for your career growth.
What is a Salary slip?
Its very important for a professional to know & understand what is salary slip. If a professional has no idea what a salary slip is, he/she can have a lot of trouble completing his/her documentation formalities while applying for jobs in future.It is a legal entity & can be better explained as a duly stamped document provided by an employer. The purpose of issuing this document is to furnish details of an employee’s salary.
For those who dont understand what is a salary payslip? let me first clarify that salary slip is also known as salary payslip. Next time when an employer asks about your salary payslip, dont be perplexed with the word.
Various components including HRA, TA, any bonus, etc are mentioned in s detailed fashion. This document also provides details of deductions made for a specified time period.
Bounded by law, salary slips have to be provided periodically by the employer as proof of salary payments made to an employee.
How to apply for a Salary slip
After understanding what is salary slip, another important question is, asking for an original salary slip. Usually, a lot of employees have this confusion that the provision of salary slips is a large firm practice. However, it must be noted that an employee can request some form of payslip from an employer no matter whatever the size of the firm.
There is no fixed format for a payslip, however, any document that bears the stamp of the firm, provides details of salary components with any deductions made, can be considered a payslip.
Alternatively, the following departments or responsible department heads can also provide salary slips:
- Human Resource Department or an HR Manager.
- Finance Department or Chief Financial Officer.
- Outsourced Payroll service provider who manages salaries for the employer.
- Concerned Bank, wherein salary is credited every month directly into your account. However, this shall only be the proof of salary being credited every month without any details of deductions or break up.
Importance of Salary Slip
Salary Slips are useful for many important reasons. Here is a list of reasons why salary slips are so important in the first place.
1) Income Tax Calculation
Salary slips help in precise calculation of income tax payable along with determining how much refund can an employee claim for a financial year.
2) Access to Government Facilities
Monthly payslips open a broad gateway for employees to attain access to various government subsided schemes. These include subsidies in state-run medical care, subsidized rates for food grains, etc.
3) Applying For Loans
To avail various bank credits, loans or other bank borrowings, monthly payslips play a vital role in deciding the credit limit. Every financial institution mandatorily needs a monthly payslip of an employee before considering a loan.
This is done to assess creditworthiness & capability to repay the loan in a fixed amount of time. Payslips also act as an assurance of repayment from employees' end towards the financial institution.
4) Negotiating Salary
Salary Payslip helps as a pivot for negotiation with the new employer. It acts as a bargaining chip for both employees as well as an employer. An employee can better bargain for a raise in salary, whereas the employer can reach a deciding salary amount to be paid.
5) Legal Proof
Pay Slips are undeniable legally valid proof of employment association with a particular firm. Nowadays while applying for visas or seeking admission for doctorate degrees in global universities, it’s important to furnish details of employment along with valid monthly payslips.
Components of salary slip
Since a salary slip contains a detailed break up of salary, however broadly payslips can be broken down in two major parts, Income & Deductions.
This component usually determines monthly earnings of an employee. Income includes,
Basic Salary is the fixed part of monthly salary. Usually, it's fixed at 35-40% of the total take-home salary.
This is a special allowance paid to an employee to minimize market inflation impact. This is provided to strike a balance between inflation rate & current income of an employee.
House Rent Allowance (HRA)
HRA is simply a form of rental reimbursement feature which is paid as a part of monthly salary. This is usually determined by the location of the rented property and usually comprises of 40-50% of the basic salary.
Also known as Travel Allowance, Conveyance allowance is a salary component which provides special allowance to travel to & fro from home to work.
Leave travel allowance is an allowance provided to an employee, covering him/her financially along with immediate family members’ while he/she is on an approved leave.
This component covers all necessary medical expenses incurred during the tenure of employment.
Bonus & Other Special Allowances
This component of the salary is not fixed & is provided on a timely basis depending upon performance, or any other parameter prefixed by a firm to encourage an employee & keep him/her motivated.
The mentioned components are deducted from monthly take-home salary, thus these components are found in the deductions section of the monthly payslip.
Employees Provident Fund is a legal mandatory contribution that gets deducted every month towards an employee’s provident fund account wherein equal amount of contribution is made from an employers end. An employee can in turn claim this amount as his/her gratuity.
A minimal amount of tax is deducted from an employee’s salary every month as a professional tax paid towards the government. Every state has a tax slab & deductions are made according to the slabs provided by the government.
Tax Deductible Source
TDS is the income tax deduction that is made primarily from the employer's end while giving salary to employees. These deductions are made according to the income tax slabs provided. These deductions are a monthly recurring cycle of payment.
Pay Slip format is a designated systematic structure for furnishing financial information of an employee’s monthly salary.
Every firm has its own payslip format. Some of the basic information indicators on a payslip shall contain the following details, Basic salary, HRA, LTA, Medical Allowance, PF deduction, Professional Tax etc.
Company Name Address Month & Year
Stamp & Signature:_____________________
Types of Payslips
In an era of digitalization, it is quite obvious to assume that manual salary slips are an obsolete practice. Yet, it can’t be completely ruled out that some employers still rely on manual payslips. However, manual payslips have quite a purpose. They are considered original payslips & also receipt of payments.
Around the world, countless examples of such practice can be found, wherein a government revenue stamp needs to be affixed to a salary slip.
However, the majority of firms have the practice to provide digital salary slips which are also broadly known as E-Salary Slips. The most important purpose of digital salary slips is that they can be well stored or printed for any reference in the future.
Legal Validity of Manual & Digital Payslips
Payslips in manual or digital form, both hold the same legal status. However, any kind of alternation or tampering with a monthly payslip is a criminal offense.
Wage disputes are usually resolved in the labour court, however, these cases have seen a huge drop in number as most of the firms have started digitally transferring salaries to employees directly in their bank account.
What do you understand by Salary Certificate? How is it different from a salary slip?
A salary certificate as the name suggests is a signed certificate on a company’s letterhead & stamped by authorized authority, to certify that an individual was working with a particular firm for a given period of time in return for fixed monetary gains.
A salary certificate is different than a salary slip broadly as this certificate doesn’t necessarily show the detailed breakup of the employee’s salary, whereas a salary slip gives complete detail of income & deductions made in the monthly salary.
The salary certificate just assures proof of employment & does not necessarily indicate the financial standing of an employee whereas salary slip along not only assures proof of employment but also gives a detailed idea about the financial standing of an employee.
Before getting out there to find your dream job, make sure you are well aware of norms & documentation required to have a hassle-free onboarding. To strengthen a career growth path, it is important to be well versed with the norms of the professional world.
Next time you plan to resign from your previous organization to leap towards a brighter future, make sure all your exit formalities are well in place & you have all your salary slips in hand for reference.
Also Read: To understand salary breakups & components in a detailed manner, check out
Understanding Salary Breakup, Salary Structure, And Salary Components!
All the best!