Everything You Need to Know about Payslips in Payroll Management
UBS

Everything You Need to Know about Payslips in Payroll Management

January 10, 2023
Payroll
payslips

Payslips – A very important thing for working professionals. Every working employee gets a salary slip. But most people do not even know the importance of it.

Do you know why a payslip is important?

If you are an HR Manager or an employer, you might need to create Employee Payslips at the end of the month.

Creating payslips manually can be erroneous and sometimes hectic too if you have so many employees in your organization.

However, do you know that employee salary slips can also be created online, and even customized according to the salary structure of your business? You can use automated payroll management software that can help you auto-generate payslips for your employees.

Can you complete your payroll in just one click

In this blog, we will see various aspects of a payslip. Keep reading to know more.

What is a Payslip?

A Payslip or a salary slip is a document that is issued every month by an employer to its employees. It contains a detailed breakdown of an employee’s salary and deductions for a particular pay cycle. This document can either be a mailed copy or can be emailed to the employees. Also, any company having a business is bound to issue a payslip periodically as proof of salary payments to the employees and the deductions made.

Thinking of creating payslips manually? Don’t stress over manual processes, go automated. UBS Payroll software offers you the functionality of auto-generated payslips. Once you set a date, the employee salaries will be calculated and payslips will be generated automatically to every employee’s email. Every organization’s salary slip format is different. Below is a general salary slip format given for your better understanding.

What is a Payslip

Brief Salary Slip Format

As we said above that the monthly salary slip format of every company is different, however, the basic payslip format contains the following details:

  • Logo, Name of the company, address, month, and year.
  • It also includes the employee code, name, designation, and, department
  • It must include the employee’s PAN, Aadhar, and Bank Account Number
  • The payslip will contain the EPF Account Number and UAN (Universal Account Number)
  • Apart from these, it will show the working days of the month and then the leaves
  • Also, it will contain the list of income and deduction
  • In numbers and words, the net payable amount will be mentioned at the bottom.

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Salary Slip Components

The employer generates the payslip every month and the employees can download the payslip in pdf format. However, how many of you understand the salary slip format and its components in its entirety?

Most people only consider the value of a payslip only when they apply for a loan or new credit card. However, here is why it’s critical to have a deeper understanding of the salary slip format.

  • When looking for a new job, weigh your options carefully.
  • Reduce tax liability as much as possible by utilizing all permitted deductions
  • Recognize the amount of the salary that is required to be saved (Employee Provident Fund EPF, ESI, etc.)

Salary Slip Components

A wage slip or pay slip contains basic details such as the name of the employer, the person’s name, title, and employee code. Income/earnings and deductions are the two primary categories of salary components.

Income

This part of the salary slip contains the basic salary and allowances. Every component of the income is discussed below.

  • Basic

As the name suggests, basic is the basic component of the salary. It constitutes 35 – 50% of the salary. It serves as the foundation for other pay components. At lower levels, the basic is frequently higher. Other allowances typically increase as the individual advances within the firm. The basic pay is typically kept low by organizations so that the allowance pay isn’t increased. The employee is responsible for paying 100% of taxes on the salary. The first item on the salary slip’s earnings side is basic.

  • Dearness Allowance

To counteract the effects of inflation on one’s wages, one is given a Dearness Allowance. It is usually 30-40% of the basic pay. DA is directly dependent on the cost of living. It differs accordingly based on the region. Basic and DA are viewed as pay for the purposes of income tax. As a result, it is taxable. It appears on the pay slip’s earnings side immediately following the basic pay.

  • House Rent Allowance

Employees who live in rented housing receive House Rent Allowance (HRA). The HRA is based on the employee’s city of residence. In a major metropolis, HRA is equal to 50% of base pay. It is 40% of the base salary in all other cities. Given that it is an allowance, housing rent allowance is tax-free up to a certain amount, providing the employee pays the rent. It can be found on the salary slip’s earnings side. One can save income tax on HRA. The exemption is the minimum of the below:

  • Actual HRA Received
  • Rent paid annually – 10% of the pay (Basic + DA)
  • 50% of (Basic + DA) if the location is Chennai, Mumbai, Kolkata, or Delhi; or 40% of (Basic + DA) for other cities.

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  • Conveyance Allowance

Conveyance Allowance

Conveyance Allowance is the sum an employer gives a worker to cover the cost of getting to and from work. It is a concession. hence is tax-free up to a certain amount. It can be found on the salary slip’s earnings side. On the conveyance allowance, income tax can be avoided. The exemption is the minimum of below:

  • INR 1600/month 
  • Actual conveyance allowance received
  • Medical Allowance

A medical allowance is a sum that an employer gives to a worker to cover medical costs incurred while they are employed. On a medical allowance, income tax can be avoided. However, the employer can only pay the employee this sum after receiving proof in the form of medical bills. The allowance will still be paid to the employee even if they don’t provide proof of their medical expenses because it will be fully taxed. The allowance of up to INR 15,000 is only excluded from tax in the event that the documentation is presented. It can be found on the salary slip’s earnings side.

  • Leave Travel Allowance

Employers provide it to cover the cost of an employee’s travel while they are on leave. It also covers the immediate family members of the employee’s travel costs. To qualify for the discount, you must provide proof of your travel within specific parameters. The leave travel allowance tax exemption does not apply to any expenses incurred during the trip that are not related to transportation. Additionally, the exemption is only valid for two trips made over a period of four calendar years. It can be found on the salary slip’s earnings side.

  • Special Allowance in Salary

Performance-based compensation is a type of special allowance. These are typically given to employees to motivate them to perform better. Additionally, these limits differ from business to business. Special benefits are 100% taxable. It can be found on the salary slip’s earnings side.

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Deductions

The deductions part of the salary slip contains PT, TDS, and EPF. The same is explained further in the blog.

Deductions

  • Professional Tax

A minor tax is known as the “professional tax” is imposed by state governments on earning professionals. In just a few states it is refundable. The following states fall into this category: West Bengal, Andhra Pradesh, Karnataka, Maharashtra, Tamil Nadu, Gujarat, Telangana, Chhattisgarh, Kerala, Assam, Orissa, Tripura, Meghalaya, Bihar, Jharkhand, and Madhya Pradesh. It is assessed to everyone who makes a living through a medium, not only experts. The taxable income is reduced by this sum. It typically only amounts to a few hundred rupees each month and is taxed at the highest marginal rate. It can be seen on the salary slip’s side that shows deductions.

  • Tax Deducted at Source

It is the sum that the employer withholds on behalf of the income tax division. It is dependent on the employee’s gross tax bracket. By making investments in tax-exempt securities like equity funds (ELSS), PPF, NPS, and tax-saving FDs, one can lower this sum. It can be seen on the salary slip’s side that shows deductions. Your take-home pay rises as a result of investing in section 80C instruments under the Income Tax Act. One may purchase mutual funds (ELSS), provide the corporation with investment documentation, and claim TDS returns.

  • Employee Provident Fund (EPF)

It is the employee’s provident fund contribution. The Income Tax Act’s section 80C applies to this. The accumulation of cash for an employee’s retirement is known as a provident fund. The Employees’ Provident Fund Organization is in charge of overseeing it. EPF contributions total 12% of the employee’s base pay. For the employees’ retirement, the employer also contributes in a similar way.

However, not all of the money donated to the employee provident fund actually ends up in it. The Employees’ Pension Scheme receives 8.33% of the employee contribution. If their monthly salary exceeds INR 15,000, the contribution is INR 1,250. 8.33% of employees’ salaries under INR 15,000 are allocated to the Employees’ Pension Scheme. The remaining sum is kept in the EPF program. Employees can, however, choose to forego the EPF program (up to a certain point) and invest instead in products that yield higher returns, such as equity funds (ELSS). On the portion of the pay stub devoted to deductions, Employee Provident Fund is listed.

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Few Salary Slip Formulas

Particulars Formulas
Taxable Income Income (Gross Salary + Other Earnings) – Deductions
CTC (Total salary package of the employee) Gross Salary + PF + Gratuity
Gross Salary Basic + HRA + Other Allowances
Net Salary Basic + HRA + Allowances – Income Tax – Employer’s Provident Fund – Professional Tax

Remember that you don’t need to learn these formulas to calculate employee salaries when you have cloud payroll software at your company.

Why is a Salary Slip Important?

Firstly, a payslip is important because it acts as a confirmation that the employee is salaried in the ABC organization. With the payslips, the employee can not just prove the credit score but also get bank loans along the way.

Many MNCs reject salary slips that do not have the necessary data. So, it is the responsibility of every employee to make sure that his/her payslip contains all the required information.

All in all, a salary slip:

  • Proves your employment status
  • Helps in tax planning
  • Helps in salary negotiation
  • Simplifies the borrowing process, and much more.

Things to Remember about Payslip

  • The salary slips look beautiful, but the payroll team has to put so much effort into arriving at the net pay amount.
  • In today’s time, there are many automated payroll management software in India, that provide customizable payslip templates. All the complex calculations are automated in such software.
  • You can customize the payslip templates as per your organization’s needs.
  • The TDS calculations are complex. The automated software always stays updated on government compliances.

Benefits of ePayslips over Manual Pay Slips

Benefits of ePayslips over Manual Pay Slips

Creating salary slips manually looks easy, but it’s not. Every month, HR managers put a lot of time and effort into it. However, a significant number of businesses in India have recently begun employing e-payslips.

Using HR payroll software, E-payslips are automatically prepared and sent to employees.

Here are some of the major advantages of electronic payslips versus paper ones:

  • Cost-effective

Since payslips are stored in the payroll processing system, employees can download and print the slips on their own. This is the way companies can say goodbye to the costly and time-consuming paperwork.

In a recent study, 83% of respondents claimed that switching to E-payslips allowed them to save money.

  • Environmental-friendly

Manual payslips are made with paper and ink which are a threat to our environment. eSlips on the other hand, cuts down the use of paper and ink. Companies that want to contribute their bit towards the environment should eliminate the use of paper-based payslips.

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  • Safe

With ePayslips, employers would not have to worry about confidential information getting into the wrong hands. 

  • Stored in a Single place

Employees historically had little choice but to sift through mountains of paperwork in order to learn the specifics of their prior compensation. Thankfully, E-payslips make this problem simpler. Employees only need to log in to their HR program to access their previous payslips.

  • 24*7 Accessibility

Nowadays, the majority of HR and payroll processing systems offer mobile applications, allowing employees to easily download and view their payslips wherever they are.

Conclusion

Why endure the discomfort when you may get the customized payslip template when you already have a lot to handle and carry out?

If you were searching for automated payroll software with an auto-generated payslip feature, stop searching right now and get in touch with us for fast, accurate, and efficient payroll processing.

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FAQs

What are the components of a payslip?

A payslip contains the company logo, employee’s name, code, basic salary, allowances, deductions, and more. Read the blog to know more.

Does a start-up require payroll software?

A firm, regardless of its size or style, must have a payroll system in place. You can use it to automate, maintain, and manage the payroll for your employees. Book demo with UBS Payroll - a software for small- and medium-sized businesses.

What should be mentioned in the salary slip?

A salary slip is proof of an employee’s employment. It should contain all the basic details like salary, allowances, deductions, and more. Read the blog to know more about Payslips.

What is a payroll management system?

A payroll management system is the process used by employers to pay their employees' wages. Additionally, it has to do with how they honor their duties to their employees, obey the law, and maintain proper financial records.

Alpesh Vaghasiya

Alpesh Vaghasiya

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