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HR Glossary

A comprehensive glossary built by PeopleStrong experts to help you navigate the world of work effortlessly.

A

Accrued Payroll

What is Accrued Payroll? Accrued Payroll refers to the total amount of wages and related expenses that a company owes its employees for work already performed but not yet paid by the end of an accounting period. It represents a liability on the company’s balance sheet until the payment is made in the next payroll […]
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API Integration

What is API Integration? API Integration is the process of connecting two or more software applications through their Application Programming Interfaces (APIs) to enable seamless data exchange and automated workflows. APIs act as bridges that allow systems to communicate and share information in real time without manual intervention. API integration eliminates data silos, reduces human […]
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Arrears Deduction

What is Arrears Deduction? Arrears Deduction refers to the recovery of excess payments made to an employee in a previous payroll cycle due to errors, overpayments, or retroactive salary corrections. It ensures that the employer’s payroll remains accurate and compliant by adjusting the overpaid amount in a subsequent salary cycle. Such deductions are common during […]
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Arrears Payment

What is Arrears Payment? Arrears Payment refers to the money that is owed to an employee for a previous period but paid later due to delays, revisions, or retrospective changes in salary or allowances. These payments usually occur when a salary structure, increment, promotion, or government pay scale is revised with retroactive effect. Arrears ensure […]
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B

Bank Advice

What is Bank Advice? Bank Advice is an official communication or document sent by an employer to its bank, instructing it to disburse employee salaries, reimbursements, or vendor payments directly into respective bank accounts. In payroll processing, a bank advice acts as an authorization and summary statement confirming the final net pay amounts, ensuring error-free […]
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Base Days

What are Base Days in Payroll? Base Days refer to the fixed or standardized number of days used as the denominator in salary and payroll calculations, such as prorating monthly wages, leave entitlements, or service credits. Base days provide a consistent framework for calculating daily wages and benefits regardless of the actual calendar days in […]
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Basic Salary

What is Basic Salary? Basic Salary is the foundational, fixed component of an employee’s salary—it’s the core amount paid for work performed, before adding any allowances, bonuses, or making deductions for statutory contributions. It often forms 35-50% of the total salary (CTC) and is the reference point for calculating other salary elements like Provident Fund […]
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Bonus

What is a Bonus? A Bonus is a monetary reward given by an employer to employees, either as a statutory entitlement or a discretionary performance incentive. It serves as a financial recognition of an employee’s contribution to organizational success and helps enhance motivation, retention, and job satisfaction. Bonuses can be mandatory under law (like the […]
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C

CII index in CLA perquisite

What is the CII Index in CLA Perquisite? The CII Index, or Cost Inflation Index, is a numerical measure published annually by the Central Board of Direct Taxes (CBDT) to reflect the rate of inflation in India. In the context of CLA (City Compensatory Allowance) or other Cost of Living-related Perquisites, the CII is used […]
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Cloud Payroll

What is Cloud Payroll? Cloud Payroll refers to a web-based payroll management system hosted on cloud servers that enables organizations to process employee salaries, manage statutory compliance, and generate reports securely over the internet. Unlike traditional on-premise systems, cloud payroll software allows real-time access to payroll data from anywhere, ensuring scalability, automation, and compliance accuracy. […]
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Conveyance Allowance

What is Conveyance Allowance? Conveyance Allowance is a financial benefit provided by employers to employees to cover the cost of commuting between their residence and workplace. It compensates for expenses such as fuel, public transport fares, tolls, and parking fees. This allowance is part of the salary package but is separate from the basic salary. […]
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Cost Center

What is a Cost Center? A Cost Center is a specific department, function, or unit within an organization that incurs expenses but does not directly generate revenue. Its primary purpose is to track, control, and manage costs associated with business operations, enabling better financial accountability and performance measurement. While cost centers don’t earn profit, they […]
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Cost to Company (CTC)

What is Cost to Company (CTC)? Cost to Company (CTC) is the total annual expense a company incurs to employ an individual. More than just the monthly salary, CTC bundles all monetary and non-monetary benefits provided—such as basic pay, allowances (HRA, medical, travel), statutory contributions (Provident Fund, ESI, gratuity), insurance, performance bonuses, reimbursements, and even […]
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CTC Reimbursement

What is CTC Reimbursement? CTC Reimbursement refers to the repayment of eligible expenses incurred by employees as part of their Cost to Company (CTC) structure. These reimbursements are designed to cover specific work-related or benefit-linked expenditures, such as telephone bills, fuel, internet, travel, or meal allowances. The concept ensures that employees are compensated for genuine […]
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Cut-off Date

What is Cut-off Date in Payroll? A Cut-off Date is a predetermined deadline in the payroll process by which all employee data—such as attendance, hours worked, bonuses, deductions, and new joiner information—must be finalized and submitted to be included in that payroll cycle. Once the cut-off date passes, any new changes or inputs are deferred […]
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D

DA (Dearness Allowance)

What is Dearness Allowance (DA)? Dearness Allowance (DA) is a salary component provided primarily to government employees, public sector workers, and pensioners to offset the impact of inflation and rising living costs. It acts as a cost-of-living adjustment, ensuring that the purchasing power of an employee’s income is not eroded over time due to price […]
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E

EDLI (Employee Deposit Linked Insurance)

What is EDLI (Employees Deposit Linked Insurance)? Employees Deposit Linked Insurance (EDLI) is a government-backed life insurance scheme designed to provide financial security to employees in the event of untimely death. Managed by the Employees’ Provident Fund Organisation (EPFO), EDLI offers a lump sum benefit to the nominee or legal heirs of a deceased employee. […]
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EPF/PF (Employee Provident Fund)

What is EPF/PF (Employee Provident Fund)? Employee Provident Fund (EPF), commonly known as Provident Fund (PF), is a government-backed retirement savings scheme designed to help salaried employees build a financial corpus for their post-retirement life. Both the employee and employer contribute a fixed percentage of the employee’s basic salary plus dearness allowance towards this fund […]
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EPS (Employee Pension Scheme)

What is EPS (Employee Pension Scheme)? Employee Pension Scheme (EPS) is a government-backed social security pension plan administered by the Employees’ Provident Fund Organisation (EPFO) to provide financial security through monthly pensions after retirement, disability, or to family members in case of an employee’s death. It is an essential retirement benefit for employees working in […]
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ESI/ESIC (Employee State Insurance)

What is ESI/ESIC (Employee State Insurance)? Employee State Insurance (ESI) is a social security and health insurance scheme introduced by the Government of India under the Employees’ State Insurance Act, 1948. It is designed to provide medical and financial protection to employees and their families during contingencies like sickness, maternity, disability, and employment-related injuries. Administered […]
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F

FFS (Full & Final Settlement)

What is FFS (Full & Final Settlement)? Full & Final Settlement (FFS) refers to the process carried out by an employer to clear all dues payable to an employee at the time of their separation from the organization — whether due to resignation, retirement, termination, or contract completion. It ensures both the employer and employee […]
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Fixed Pay

What is Fixed Pay? Fixed Pay refers to the guaranteed portion of an employee’s salary that remains constant each payroll cycle, regardless of hours worked, performance, or company profits. It is the assured amount that an employee receives as monthly or annual compensation for their services. Fixed pay typically includes the basic salary plus fixed […]
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Form 12BB

What is Form 12BB? Form 12BB is a declaration form submitted by salaried employees to their employers, detailing their investments and expenses eligible for tax deductions under the Income Tax Act. Introduced by the Central Board of Direct Taxes (CBDT) effective from June 1, 2016, this standardized form allows employers to accurately compute the Tax […]
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Form 16

What is Form 16? Form 16 is an official TDS (Tax Deducted at Source) certificate issued by an employer to employees. It provides a detailed summary of the salary paid to an employee and the amount of tax deducted and deposited with the government during a financial year. Form 16 is an important document for […]
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G

Gig Economy Payroll

What is Gig Economy Payroll? Gig Economy Payroll refers to the compensation and payment management system designed for gig workers or freelancers who work on short-term, project-based, or flexible assignments rather than traditional full-time employment. Unlike conventional payroll, which follows fixed monthly salary cycles, gig payroll focuses on on-demand, task-based, or milestone-based payments. It ensures […]
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Gratuity

What is Gratuity? Gratuity is a lump-sum monetary benefit paid by an employer to an employee as a token of appreciation for long-term service. It is governed by the Payment of Gratuity Act, 1972 and becomes payable when an employee leaves the organization after completing at least five years of continuous service, whether due to […]
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Gross Salary Explained: Definition, Components, and Example

What is Gross Salary? Gross Salary is the total amount an employee earns before any deductions such as taxes, provident fund, or professional tax are subtracted. It represents the sum of the basic salary, allowances (like House Rent Allowance, Dearness Allowance, Conveyance Allowance, Medical Allowance), bonuses, overtime pay, and any performance-linked incentives. Unlike CTC, gross […]
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H

Higher Pension

What is Higher Pension? Higher Pension refers to the enhanced pension benefit available to employees under the Employees’ Pension Scheme (EPS), 1995, who choose to contribute a higher portion of their salary toward the pension fund, instead of being capped at the statutory wage limit. This provision allows employees covered under the Employees’ Provident Fund […]
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HRA (House Rent Allowance)

What is House Rent Allowance (HRA)? House Rent Allowance (HRA) is a key salary component provided by employers to help employees meet their rental housing expenses. It is usually part of the Cost to Company (CTC) and aims to ease the financial burden of living in rented accommodation. HRA is partly taxable, but under Indian […]
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J

Joining Bonus

What is a Joining Bonus? A Joining Bonus is a one-time financial incentive offered by an employer to a new hire as part of their employment offer or onboarding package. It is designed to attract and secure top talent, especially in competitive industries, or to compensate candidates for benefits lost when leaving their previous employer […]
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Journal Vouchar (JV)

What is a Journal Voucher (JV)? A Journal Voucher (JV) is an accounting document used to record non-cash financial transactions or adjustments in an organization’s books of accounts. It serves as an authorization record for posting entries in the general ledger, especially for transactions that do not involve immediate cash inflow or outflow. In payroll, […]
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L

Leave Encahsment

What is Leave Encashment? Leave Encashment refers to the monetary compensation paid to an employee in exchange for unused earned or privilege leaves accumulated during their service period. Employees are entitled to a certain number of paid leaves annually, and any unused portion can either be carried forward or encashed as per the company’s leave […]
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LOP (Loss of Pay)

What is LOP (Loss of Pay)? Loss of Pay (LOP) refers to the salary deduction made when an employee takes leave beyond their entitled paid leave balance or is absent without approval. It means the employee is not paid for those specific days of absence. LOP ensures that employees are compensated only for actual working […]
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LTA (Leave Travel Allowance)

What is Leave Travel Allowance (LTA)? Leave Travel Allowance (LTA) is a tax-exempt benefit provided by employers to employees, designed to reimburse travel expenses for vacations within India. Included as a salary component, LTA helps employees save taxes on travel costs when they take leave from work and travel domestically, making holidays more affordable. Key […]
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LWF (Labour Welfare Fund)

What is Labour Welfare Fund (LWF)? Labour Welfare Fund (LWF) is a statutory fund established by various state governments in India to promote the welfare and improve the living standards of workers employed in factories, mines, plantations, and other establishments. It aims to provide social security, financial aid, and well-being facilities such as housing, medical […]
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M

Medical Allowance

What is Medical Allowance? Medical Allowance is a fixed sum paid by employers to employees as part of their salary package to help cover routine medical expenses like doctor consultations, medicines, and minor treatments. Unlike medical reimbursements, which require employees to submit bills for actual expenses, medical allowance is paid regardless of whether medical bills […]
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N

Net Salary / Take Home Pay

What is Net Salary / Take Home Pay? Net Salary—also known as Take Home Pay or In-Hand Salary—is the actual amount an employee receives each month after all statutory and optional deductions are subtracted from the gross salary. Unlike CTC or gross, net salary focuses on what’s credited to your bank account and available for […]
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New Tax Regime

What is the New Tax Regime? The New Tax Regime is an optional income tax structure introduced under the Finance Act, 2020 to simplify tax computation by offering lower tax rates but fewer exemptions and deductions. It aims to make the tax system straightforward and transparent, reducing dependency on investment-linked deductions. Taxpayers can choose annually […]
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Notice Pay

What is Notice Pay? Notice Pay refers to the monetary compensation paid in lieu of serving the notice period when either the employee or employer wishes to terminate the employment before completing the required notice duration. It ensures fairness and compliance when one party opts for early exit or immediate separation without full notice period […]
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Notice Period

What is a Notice Period? A Notice Period is the time duration an employee or employer must serve after giving or receiving a resignation or termination notice, before officially ending the employment relationship. It acts as a transition period allowing both parties — the employee and the organization — to complete pending tasks, arrange handovers, […]
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O

OffCycle Payment

What is Off-Cycle Payment? An Off-Cycle Payment refers to any salary or payment processed outside the organization’s regular payroll cycle. It is made to correct payroll discrepancies, compensate for urgent payouts, or handle special situations like arrears, bonuses, or adjustments after payroll closure. Off-cycle runs ensure employees receive dues without waiting for the next scheduled […]
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Old Tax Regime

What is the Old Tax Regime? The Old Tax Regime is the traditional system of income tax computation in India, which allows taxpayers to claim various deductions and exemptions to reduce their taxable income. Introduced before the new optional regime (as per the Finance Act, 2020), it continues to be available as a choice for […]
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P

PAN (Permanent Account Number)

What is PAN (Permanent Account Number)? Permanent Account Number (PAN) is a unique 10-character alphanumeric code issued by the Income Tax Department of India to individuals, companies, and entities. It serves as a universal identification key for tracking financial transactions and preventing tax evasion. Key Features: Example Example PAN: ABCDE1234FScenario:Amit Sharma applies for a PAN […]
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Payroll Cycle

What is Payroll Cycle? A Payroll Cycle is the recurring schedule that defines the frequency and timing of employee salary payments within an organization. It covers the period between two consecutive payday events, starting from tracking employee work hours or attendance to the final disbursal of salaries. The payroll cycle ensures employees are paid accurately […]
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Payroll Outsourcing

What is Payroll Outsourcing? Payroll Outsourcing is the process where an organization delegates its payroll management functions to a third-party payroll service provider. This includes activities like salary computation, statutory compliance (PF, ESI, PT, TDS), payslip generation, and reporting. Outsourcing payroll allows companies to focus on core business operations while ensuring timely and accurate salary […]
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Payroll Reconciliation

What is Payroll Reconciliation? Payroll Reconciliation is the systematic process of verifying and matching payroll records to ensure that salaries, deductions, taxes, and contributions are calculated and reported accurately before disbursement. It acts as a crucial internal control that helps prevent payroll errors, compliance breaches, and financial discrepancies. Payroll reconciliation ensures that every employee receives […]
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Payroll Register

What is a Payroll Register? A Payroll Register is a detailed record that captures all payroll-related information for each employee during a specific pay period. It includes comprehensive data such as employee names, hours worked, gross salary, deductions (taxes, provident fund, insurance), net pay, bonuses, and employer contributions. The payroll register acts as a centralized […]
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Professional Tax (PT)

What is Professional Tax (PT)? Professional Tax (PT) is a state-level tax levied on individuals engaged in employment, trade, or profession in India. It is a direct tax imposed and collected by state governments to fund welfare schemes and local development programs. PT applies to both salaried employees and self-employed professionals such as doctors, lawyers, […]
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Professional Tax (PT)

What is Professional Tax (PT)? Professional Tax (PT) is a state-level tax levied on individuals engaged in employment, trade, or profession in India. It is a direct tax imposed and collected by state governments to fund welfare schemes and local development programs. PT applies to both salaried employees and self-employed professionals such as doctors, lawyers, […]
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R

Real-time Payroll

What is Real-time Payroll? Real-time Payroll refers to a modern payroll processing system where employee earnings, deductions, and tax liabilities are calculated and updated instantly as data changes — such as attendance, work hours, bonuses, or statutory updates. Unlike traditional payroll systems that run monthly or bi-weekly, real-time payroll provides continuous calculation and visibility of […]
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Retention Bonus

What is a Retention Bonus? A Retention Bonus is a one-time financial incentive offered by an employer to encourage employees to remain with the organization for a specified period, particularly during critical business phases such as mergers, restructuring, project transitions, or leadership changes. It acts as a motivational and stabilizing tool to prevent key talent […]
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Run Payroll

What is Run Payroll? Running Payroll is the process by which an organization calculates employee salaries, deductions, and benefits for a specific payroll period and disburses the net pay to employees. It involves gathering all relevant employee data, processing it through payroll software or systems, and ensuring accurate and timely payments. This critical HR and […]
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S

Salary Register

What is a Salary Register? A Salary Register is a comprehensive payroll document that records monthly salary details of all employees in an organization. It serves as an official record of gross pay, deductions, net pay, and employer contributions for compliance, auditing, and financial reporting. Key Features: Purpose: Example XYZ Ltd. maintains a salary register […]
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Salary Slip/Pay Slip/Monthly Slip

What is a Salary Slip / Pay Slip / Monthly Slip? A Salary Slip (also known as Pay Slip or Monthly Slip) is an official document issued by an employer that provides a detailed breakdown of an employee’s monthly earnings and deductions. It acts as proof of employment and income, showing both gross and net […]
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Section 80C

What is Section 80C? Section 80C of the Income Tax Act, 1961 is one of the most widely used provisions that allows individual taxpayers and Hindu Undivided Families (HUFs) to reduce taxable income by claiming deductions on specific investments and expenditures. The primary objective of Section 80C is to encourage long-term savings and financial discipline […]
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Section 80D

What is Section 80D? Section 80D of the Income Tax Act, 1961 allows taxpayers to claim deductions on health insurance premiums paid for themselves, their family, and parents. The intent behind this section is to promote health insurance coverage and reduce the financial burden of medical expenses. It applies to both individuals and Hindu Undivided […]
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Special Allowance

What is Special Allowance? Special Allowance is an additional payment made by employers to employees beyond their basic salary and other fixed allowances. It serves various purposes such as compensating employees for specific expenses or rewarding exceptional performance and is a flexible component of the salary structure. Unlike statutory allowances like HRA or medical allowance, […]
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T

TAN (Tax Deduction Account Number)

What is TAN (Tax Deduction Account Number)? Tax Deduction Account Number (TAN) is a unique 10-character alphanumeric code issued by the Income Tax Department of India to entities (such as employers, companies, or organizations) responsible for deducting or collecting tax at source under the Income Tax Act, 1961. It is mandatory for all persons who […]
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TDS (Tax Deducted at Source)

What is TDS (Tax Deducted at Source)? Tax Deducted at Source (TDS) is a system implemented by the Indian government to collect income tax at the point where income is generated. Under this system, the payer (called the deductor) is responsible for deducting a certain percentage of tax before paying the income to the recipient […]
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U

UAN (Universal Account Number)

What is UAN (Universal Account Number)? Universal Account Number (UAN) is a unique 12-digit identification number allotted by the Employees’ Provident Fund Organisation (EPFO) to every employee who contributes to the Employee Provident Fund (EPF). The UAN acts as an umbrella for multiple Member Identification Numbers (Member IDs) allotted to an individual by different employers […]
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V

Variable Pay

What is Variable Pay? Variable Pay is the portion of an employee’s compensation that fluctuates based on their performance, results, or achieving specific goals, rather than being a fixed monthly salary. It serves as an incentive to motivate employees to exceed targets and align their efforts with the company’s objectives. Unlike fixed pay, which is […]
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W

What is clawback recovery

What is Clawback Recovery? Clawback Recovery refers to the process by which an employer reclaims previously paid compensation—such as bonuses, incentives, commissions, or severance—when certain conditions are violated or later found to be invalid. It acts as a protective financial mechanism ensuring that employees or executives do not unjustly benefit from payments made based on […]
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