HR & Payroll Glossary

Compensation terms

• CTC (Cost to Company) — the total yearly cost of employing someone, including salary, employer contributions, and benefits — not the amount that lands in their bank account.
• Gross Salary — salary before statutory deductions like PF, ESIC, and TDS.
• Net Salary (take-home) — what's actually paid out after all deductions.
• Basic Pay — the fixed core component of salary that other components (PF, gratuity, HRA) are usually calculated as a percentage of.
• HRA (House Rent Allowance) — a salary component that can be partly tax-exempt if the employee pays rent, subject to conditions.

Statutory deductions

• PF (Provident Fund) — a retirement savings scheme; both employer and employee contribute a percentage of basic pay, mandatory once a company crosses the employee-count threshold.
• ESIC (Employees' State Insurance) — medical and cash benefits for employees below a salary threshold, funded by employer and employee contributions.
• TDS (Tax Deducted at Source) — income tax the employer deducts from salary each month and deposits on the employee's behalf.
• Professional Tax (PT) — a state-level tax on salaried income, with slabs that vary by state.
• LWF (Labour Welfare Fund) — a small periodic contribution some states require, funding worker welfare schemes.

Employment terms

• Gratuity — a lump-sum benefit paid to employees who complete a minimum period of continuous service (typically 5 years) with a company, under the Payment of Gratuity Act.
• Notice Period — the time an employee or employer must give before ending employment, as agreed in the appointment letter.
• Probation Period — an initial period during which performance is assessed before confirming the role.
• CTC vs Take-home — the gap between the two is statutory deductions, employer contributions, and any non-cash benefits included in CTC.