HR toolkit · Glossary

HR & payroll terms, in plain English

The words Indian HR and payroll teams use every day. Figures for PF, ESI and gratuity come from the same rules WeHR’s payroll uses.

This glossary is being checked. For filing, rely on the Acts, rules and notifications.

A

Arrears: Salary owed for an earlier month and paid later, for example when a raise is backdated. Tax and PF are worked out on it in the month it is paid.

Basic salary: The fixed core of the salary. PF, gratuity and many allowances are worked out on it, so it matters beyond its own amount.
BSR code: A 7-digit code of the bank branch that received a tax payment. It is printed on the challan and reported in the TDS return.

Challan: The receipt for a payment of tax or contributions to the government, TDS, PF, ESI, PT or LWF.
Code on Wages: The labour law, in force from 21 November 2025, that defines “wages” for PF, gratuity and other dues. If excluded allowances are more than half of the pay, the excess is added back to wages.
Comp-off(Compensatory off): A day off given for working on a weekly off or holiday.
CTC(Cost to company): Everything a company spends on an employee in a year: gross salary plus the employer’s PF, ESI, gratuity and other benefits. Take-home pay is lower.

ECR(Electronic challan cum return): The monthly file of each employee’s PF wages and contributions, uploaded on the EPFO portal before paying PF.
EDLI: Employees’ Deposit Linked Insurance, life cover for PF members, paid for by the employer.
EPF(Provident Fund, PF): A retirement savings scheme. Employees pay 12% of PF wages and the employer pays the same, part of it into the pension scheme (EPS). PF is required on wages up to ₹25,000 a month; contributing on more is optional.
EPS(Employees’ Pension Scheme): The pension part of PF: 8.33% of PF wages (up to the ceiling) from the employer’s share.
ESI(ESIC, Employees’ State Insurance): Health insurance for employees earning up to ₹21,000 a month (₹25,000 for persons with disability). Employee 0.75%, employer 3.25% of gross wages.
ESI contribution period: Six-month periods (April–September and October–March). An employee covered at the start stays covered until the period ends, even after a raise above the limit.

F&F(Full and final settlement): The last payment to someone leaving: salary to the last day, leave encashment, gratuity if due, minus notice recovery and advances, with TDS.
Form 130(Was Form 16): The yearly certificate of salary and tax deducted that an employer gives each employee, under the Income-tax Act 2025.
Form 138(Was Form 24Q): The quarterly return of TDS on salary that an employer files under the Income-tax Act 2025.
Form 140(Was Form 26Q): The quarterly return of TDS on payments other than salary to residents, for example consultants’ fees.

Gratuity: A lump sum paid when someone leaves after enough service, generally 5 years (1 year for fixed-term employees): 15 days’ wages for each year, worked out on a 26-day month, up to ₹20,00,000.
Gross salary: Total earnings for the month before any deductions.

HRA(House rent allowance): An allowance for rent. Under the old tax regime part of it can be tax-free if the employee pays rent; under the new regime it is fully taxable.

IP number(ESIC insurance number): The 10-digit number an employee gets when registered with ESIC.

Leave encashment: Payment for unused leave, usually earned leave, at exit or as the leave policy allows.
LOP(Loss of pay): Days of unpaid absence. The salary for those days is deducted.
LWF(Labour Welfare Fund): A small contribution from employees and employers to a state’s Labour Welfare Board, in the states that have one.

Muster(Attendance register): The month’s day-by-day attendance for each employee, the basis for payroll.

Net pay(Take-home pay): What reaches the employee’s bank account: gross salary minus PF, ESI, PT, LWF, TDS and other deductions, plus reimbursements.
New and old tax regime: The new regime has lower slabs and few deductions (standard deduction ₹75,000); the old regime allows deductions such as 80C and HRA. Employees choose; the new regime applies if they don’t.
Notice period: The time an employee or employer must give before employment ends, as in the appointment letter.

PAN: Permanent Account Number for income tax. Without a valid PAN, TDS on salary is at least 20%.
Payslip: The monthly statement of an employee’s earnings, deductions and net pay.
Probation: A trial period after joining, after which employment is confirmed.
Professional Tax(PT): A state tax on salaries, up to ₹2,500 a person a year, in the states that levy it. Slabs differ by state.

Regularisation: Correcting a missed or wrong punch in attendance, usually with the manager’s approval.
Reimbursement: Repayment of expenses an employee spent for work, against bills. Not salary.

Sandwich rule: Counting weekly offs or holidays between two leave days as leave too, if the leave policy says so.
Statutory bonus: Bonus under the Code on Wages for employees within the eligibility limit: 8.33% to 20% of wages, on a capped wage.

TAN: Tax Deduction Account Number, needed by every employer that deducts TDS.
TDS(Tax deducted at source): Income tax the employer deducts from salary each month and deposits with the government, based on the year’s expected tax.

UAN(Universal Account Number): An employee’s PF number for life; it stays the same across jobs.

VPF(Voluntary Provident Fund): Extra PF an employee chooses to contribute above the required share.