Why are Payslips important
for you as an employee?
Employees are an organization’s biggest asset. Motivated employees are creative, productive and can help their company grow exponentially. There are a lot of factors that drive an employee’s motivation: a company’s work culture, work-life balance, compensation, career growth. Research reveals that salary and compensation rank among the biggest driving factors for an employee’s motivation.
To ensure that employee compensation is a seamless process, organizations give a lot of credence to their payroll processing processes. Payroll processing entails that salaries are disbursed in a glitch-free manner, at the right time, and payslips – that provide an accurate compensation break-up – are provided to employees.
What is a Payslip?
A Payslip is a document which provides details of the various components of an employee’s salary. It is issued every month by an employer and can be in the form of a printed hard copy or digital copy. Salary components usually include the basic pay of an employee, the benefits he is entitled to, all deductions, including income tax and provident fund, and the final net payment given to an employee. (Read our blog on: When a Potential Employer Asks For Your PaySlips)
Various Components of a Payslip
Ideally, a Payslip or Salary slip contains a company logo, the employee’s name, designation, total salary, a list of all benefits the employee is entitled to, total deduction and the net payment that the employee receives. Let’s discuss them one by one.
Total Income
Every payslip contains a base salary from which all other benefits and deductions are calculated. For example, if the HRA is 15% of the base pay, then it is added to the total salary. Likewise, if the PF is 12% of the base pay, it is deducted from the total pay.
Benefits
Companies provide a range of benefits to their employees. This could be in the form of cash payment, House Rent Allowance (HRA), Special allowances, On-call or Shift allowances, Bonus etc. Benefits can vary from company to company.
Deductions
As per company policies, organizations deduct certain components from an employee’s salary. Some deductions are made to provide future benefits such as Provident Funds, Medical Insurance, etc. Other deductions include professional tax, income tax, loan repayments etc. (Read our blog on Understanding Section 80 deductions)
Net in-hand pay
The net in hand salary or pay is the total amount that is credited into an employee’s bank account in the form of his salary. It is calculated as total income plus benefits minus total deductions.
Benefits of Payslips
Getting a payslip is essential for employees. It’s a mandatory HR practice followed by all large and medium sized organizations. But a lot of small companies don’t provide payslips unless an employee applies for it, giving a reasonable justification.
What makes this piece of document so essential for employees? Let’s discuss its implications:
Income tax planning
All salaried employees who earn more than a certain income slab pay income tax. This tax goes into their country’s exchequer. A country’s tax laws prescribe different tax rates for different income slabs. These rates increase with increasing income. Meanwhile, the government gives tax exemptions or rebates in a lot of cases. It becomes important for employees to understand the tax bracket they fall in and make the right plans to avail of any tax benefits they are entitled to. Payslips contain the HRA, medical allowance, travel allowance, transport allowance and provident funds components of an employee’s salary. All these components are taxed differently. Payslips provide employees with a break-up of their salary components and help them plan their tax payments efficiently.
Get loans and credit card
Banks provide personal loans to individuals on the basis of their current income. Payslips contain all the vital information about income. It also provides details about any existing loans that are attached with an account. This helps banks to determine an employee’s eligibility to avail loan. Therefore, payslips are an essential document for people who want to apply for a loan.
In today’s online world, credit cards play a vital role in shopping and purchasing, be it online or offline. Every credit card comes with the credit limit which is determined by an employee’s income.
Proof of employment
A proof of employment is a vital document that people need to avail various services, be it renting a house or buying a car. An offer letter or a bank statement are usually not considered enough proof of employment. Payslips work well as it proves that an individual is currently employed with an organization. Also, as it contains vital information like the company logo, address, employee id, designation, it acts as a legal document. While applying for a visa or any overseas executive program, employees need to submit their pay slip along with their bank statement.
For seeking future employment
Payslips are an important document for employees who are exploring new work opportunities. All organizations and recruiters ask for the last three month of payslips, which helps get a clear picture of an employee’s compensation. Payslips also help in salary negotiation.
Types of Payslip
Kredily Payslip Generator
Kredily HRMS offers an all-in-one solution to organizations to manage employee compensation. It’s a one-click solution that makes the payslip generation process efficient and error-free. It automates the process from end-to-end saving an organization’s time and money. The product has three main features-
It generates payslips online
To do so, it follows a simple two-step process
The entire process is fully automated.
Generate payslip online
You can make all salary payments from any bank account directly into an employee’s bank account in one click. It helps companies pay salaries across banks, making it a simple, hassle-free, one-click payment process.
Two-step process
To enable one-click payment method, all you need to do is add your Kredpay Account number as a beneficiary in your bank account. And you are good to go with your salary payment.
Automate Payslip Generation
Your Kredpay Account is just like your e-wallet. Companies can make all their payments – to employees as well as vendors – in seconds.
Conclusion
Payslips are vital for both employees as well as organizations. Automating the payslip generation process not only helps organizations work efficiently but also increases transparency and employees’ convenience.