Salary Sheet: Components, Deductions & Net Salary

A Salary Sheet or Payroll or payroll sheet is a complete list of details of the amounts payable to employees for work done during a particular period. In other words, it can also be perceived as a Payslip. Still, the difference is that a Salary Sheet contains details about the entire organisation against a Payslip, which is employee-specific. Since the data involved in this is much more than a Payslip, the layout and structure also change accordingly.

Periodicity

It is a document relating to a company's human resources, and HR Team does the calculation. It differs from one period to another as it is calculated based on the actual number of working days. Every month, the number of leaves, working days, overtime, and other variables are different for each employee. Also, calculations can be done based on the periodicity of payments ranging from:

  • Daily
  • Weekly
  • Biweekly or
  • Monthly

In the case of the Organised Sector, Monthly wage cycle is preferred.

Who prepares the Salary Sheet?

The employer/ payroll team/ HR team (as applicable) calculates and maintains employees' financial records. For Calculation of Salaries, Payroll application Like Payroll Software in Office Anywhere are very helpful.

Components of Salary Sheet

Employee number/ Employee code

This number is the employee code or id allotted to an employee for easy identification.

Employee name

Salary Sheet Name Column Displays the employee's name as per company records. Ensure that this matches the name as appearing in the employee's bank account to avoid discrepancies during salary payments.

Working days

Specify the total number of working days of the organisation for the given payment cycle.

Loss of Pay (LOP)

Loss of pay is when the employee is not present at work, and the employee salary is not paid for the days of absence

Salary days

The total number of working days considered for payment of salary to the employee. Derive this column value by reducing the number of days of Loss of Pay from the organisation's Working days.

Employee Earnings

Basic pay

Basic pay is the minimum sum of earnings that an employee stands to receive in terms of employment. The term 'wages' is also used interchangeably with basic pay, meaning a fixed, regular payment for work or services.

Dearness Allowance

This allowance is calculated as a percentage of basic salary to mitigate the impact of inflation.

House Rent Allowance

HRA is a special allowance specifically granted to an employee by his employer towards rent for the employee's residence. For further information on conditions attached and level of exemptions, refer our article HRA (House Rent Allowance).

Transport allowance

Transport allowance granted to an employee to meet the expenditure to commute between the place of residence and the place of duty. Refer Salary Optimizer calculation.

Other allowances

Any other allowance, other than specified above that forms a part of employee salary.

Arrears

Arrears or past dues received on account of salary by the employee.

Total Earnings

Sum of all earnings of the employee in the payment cycle before considering contributions and deductions.

Employee Deductions

Contribution to Employee Provident Fund

An Employee Provident Fund is a retirement benefits scheme meant for salaried employees. A portion of the salary every month is contributed to the fund. For further information, refer our article EPF (Employee Provident Fund)

Contribution to Employee State Insurance

Employees' State Insurance is a self financial contributory fund scheme intended to provide Social protection towards workers and their dependencies. For further information, refer our article ESI (Employees' State Insurance)

Similarly, contribution to the below (if any):

  • National Pension Scheme
  • Voluntary Provident Fund

Advance recovery

Deduction of monthly instalment against salary advances extended by the employer

TDS

TDS or Tax Deducted at Source is the amount deducted from an individual's income by the employer on behalf of the employee and deposited to the Income Tax department.

For further information, refer our article TDS calculation on salary ( provide a link to the specific subheading in our 'Income Tax Calculator' page). However, the link should open in a new tab)

Professional Tax

All persons earning by way of employment are subject to pay Professional Tax if charged by their respective state. For further information, refer our article Professional Tax

Total Deductions

Total of all contributions and deductions of the employee in the payment cycle.

Net Amount

Total Earnings minus Total Deductions of each Employee is the Net amount or Net Salary for the payment cycle.

Advantages of Salary Sheet

  • It is a detailed list of a set of information of all employees during a payment cycle.
  • At the first instance, a salary sheet gives the management a view of the number of employees on the Payroll and details of the number of worker-days contributed.
  • It displays the net amount of salary payable (after considering LOPs and deductions), which is the actual outlay in terms of funds, against the workforce's total salary packages.
  • Using salary Sheet, you can ascertain contributions to Statutory payments, both from the employers and employees.
  • It gives a summary of recoveries of Advances (if any) from employees. This intern reduces the total liability during the payment cycle.
  • The sooner the Salary Sheet is drawn, the better is the management to take care of its working capital requirements.
  • Preparing Salary Sheet also ensures the statutory payments to social securities and direct taxes to governments are made in time to avoid late fees and penalties.