HR & payroll glossary for India

Short, plain-English definitions of the HR and payroll terms Indian companies use every month, with a note on how Verdeshell HRMS handles each one.

Last reviewed 18 October 2026

Basic salary: Basic salary is the fixed core of an employee's pay, before allowances, variable pay and deductions. Several statutory amounts are worked out on it, including PF and gratuity.; Under the Labour Codes in force since 21 November 2025, "wages" means basic pay, dearness allowance and retaining allowance, and where the other allowances exceed 50% of total pay the excess is added back. A very low Basic therefore no longer keeps statutory amounts low, so review salary structures with your chartered accountant.
Biometric attendance: Biometric attendance records check-in and check-out with a fingerprint, face or card reader, so each punch is tied to the person who made it.; The device stores each punch and passes it to the attendance system, where it is matched against the employee's shift. Verdeshell HRMS connects with devices from ZKTeco (including EasyTimePro), Hikvision and Suprema, plus generic HTTP-push devices, and shows when a device stops reporting.
Comp-off (Compensatory off): A comp-off is a day of paid leave given in return for working on a weekly off or a holiday. It is usually valid for a limited period, set by company policy.; In Verdeshell HRMS, an employee asks in advance through an On Duty request to work a rest day; once the manager approves and the day passes, the attendance policy settles it as a comp-off credit or as paid overtime.
CTC (Cost to Company): CTC is the total yearly amount a company spends on employing a person: fixed earnings, variable pay, and employer-side costs such as the employer's PF contribution and, where the company includes it, gratuity.; CTC is not take-home pay. Take-home is what remains of the monthly earnings after the employee's own deductions — PF, ESI, professional tax and TDS — and variable pay is paid only when it is earned. Companies differ on whether employer contributions sit inside the CTC or on top of it. In Verdeshell HRMS, CTC is entered as a yearly figure and the salary structure decides how it splits into monthly earnings, variable pay and employer contributions, with a preview before the salary is confirmed.
DPDP Act (Digital Personal Data Protection Act, 2023): The DPDP Act is India's law on digital personal data. It requires organisations to process personal data for a lawful purpose, keep it secure, and let people access and correct their data.; Employers hold a great deal of personal data — identity documents, bank details, salary and attendance — so HR systems are a large part of DPDP compliance. Verdeshell HRMS lets employees raise data requests and see the history of corrections to their records, and runs retention jobs automatically.
ECR (Electronic Challan-cum-Return): The ECR is the monthly PF return an employer uploads on the EPFO portal. It lists each member by UAN with their wages and PF, pension and EDLI contributions, and produces the challan to pay.; The ECR and its payment are due by the 15th of the month after the wage month. Verdeshell HRMS generates the ECR file from each approved payroll month, ready to upload.
EPF (Employees' Provident Fund): EPF is the retirement savings scheme run by EPFO. The employee and the employer each contribute 12% of the employee's PF wages every month.; The employee's 12% goes to EPF; the employer's 12% is split between the pension scheme (EPS, 8.33% on wages up to the statutory ceiling) and EPF. The statutory wage ceiling is ₹25,000 a month from 17 September 2026 (₹15,000 before). In Verdeshell HRMS, the company chooses its PF settings and the product warns where they look unusual.
EPS (Employees' Pension Scheme): EPS is the pension scheme under EPFO. It receives 8.33% of the employee's PF wages, up to the statutory wage ceiling, out of the employer's 12% PF contribution.; Nothing is deducted from the employee for EPS. Because the share is capped at the ceiling, an employer contributing PF on higher wages puts the extra into EPF, not EPS.
ESI (Employees' State Insurance): ESI is the social security scheme run by ESIC for employees earning up to ₹21,000 a month (₹25,000 for persons with disability). The employee pays 0.75% of wages and the employer 3.25%.; Coverage is decided for six-month contribution periods, April to September and October to March, so an employee covered at the start of a period stays covered until it ends. Contributions are due within 15 days of the end of each month.
F&F (Full and Final Settlement): Full and final settlement is the last payment made to an employee who is leaving: pending salary, leave encashment, bonuses and arrears due, less notice-period recovery and statutory deductions.; F&F usually waits for exit clearance — handing back company assets and settling advances — and is approved before it is paid. Gratuity, where the employee is eligible, is paid under its own rules and is due within 30 days of becoming payable. In Verdeshell HRMS, the settlement is calculated as part of offboarding, routed through approval, and shows a gratuity estimate with a reminder of that deadline.
Form 12BA: Form 12BA is the statement of perquisites an employer gives an employee with Form 16, showing the value of perks such as accommodation, a car or concessional loans.; From tax year 2026-27, under the Income-tax Rules, 2026, it is Form No. 123. Statements for earlier years keep the old name.
Form 12BB: Form 12BB is the statement in which an employee declares to the employer the rent, leave travel, home-loan interest and investments they will claim, so the employer can deduct the right TDS.; It is given once a year, with proof, and matters mainly under the old tax regime, where these claims reduce tax. From tax year 2026-27, under the Income-tax Rules, 2026, it is Form No. 124.
Form 16: Form 16 is the annual certificate of tax deducted at source on salary, which an employer issues to each employee by 15 June after the end of the year.; It has two parts: Part A, generated from the employer's quarterly TDS returns, and Part B, the salary and tax computation. From tax year 2026-27, under the Income-tax Act, 2025, it is Form No. 130, issued through TRACES; certificates for FY 2025-26 and earlier keep the old name.
Form 24Q: Form 24Q is the quarterly return in which an employer reports the salary paid and the tax deducted from each employee.; From tax year 2026-27, under the Income-tax Act, 2025, it is Form No. 138, filed for each quarter by 31 July, 31 October, 31 January and 31 May. The return is prepared in Protean's Return Preparation Utility and validated with its File Validation Utility. The employee's Form 16 (Form No. 130 from tax year 2026-27, issued through TRACES) is generated from these returns, so an error here carries into it.
Geofence (geofencing): A geofence is a virtual boundary drawn around a place, such as an office or a client site. A geofenced attendance app accepts a check-in only when the phone reports a location inside it.; In Verdeshell HRMS, each work site has a fence with a radius in metres, and mapping an employee to a site is what allows them to check in there. An audit mode records who would have been refused before any check-in is refused.
Gratuity: Gratuity is a lump sum an employer pays an employee on leaving after continuous service, generally five years or more: 15 days' wages for each completed year of service.; A day's wage for gratuity is the monthly wage divided by 26. The five-year condition does not apply on death or disablement, and the Code on Social Security, 2020 relaxes it for fixed-term employees. Gratuity is due within 30 days of becoming payable.
Gross salary: Gross salary is the total of an employee's earnings for a month — Basic plus allowances and any other earnings — before any deductions.; Gross salary is lower than CTC, because CTC also includes employer costs such as the employer's PF contribution. ESI coverage is decided on monthly wages, which broadly follow gross salary less reimbursements.
HRA (House Rent Allowance): HRA is an allowance paid to help an employee meet the cost of renting a home. Under the old tax regime part of it can be exempt from income tax; under the new regime it is fully taxable.; The exempt amount under the old regime is the lowest of three figures set by the income-tax rules, based on the HRA received, the rent paid and the employee's salary and city. Employees claim it by declaring their rent and giving proof to the employer.
Leave encashment: Leave encashment is payment for earned leave an employee has not taken, either during employment where the policy allows or in the full and final settlement on leaving.; Which leave types can be encashed, and how many days, is a company policy. In Verdeshell HRMS, leave encashment follows your rules and goes through approval; in a full and final settlement it is paid at 1/30 of a month's salary per day.
LOP (Loss of Pay): Loss of pay is the salary deducted for days an employee was not working and not covered by paid leave — for example unpaid leave or unexplained absence.; The deduction is the number of LOP days multiplied by a per-day rate, and the per-day rate depends on the divisor the company uses for a month: calendar days, a fixed number of days, or working days. Two companies paying the same salary can therefore deduct different amounts for one LOP day. Verdeshell HRMS takes LOP days from attendance and unpaid leave, and lets each company choose its monthly divisor: the calendar month, or a fixed 30-day or 26-day month.
Net pay: Net pay, or take-home pay, is what an employee receives in the bank for a month: gross earnings less deductions such as PF, ESI, professional tax, TDS and loss of pay.
Notice period: The notice period is the time an employee or employer must give before employment ends, as set out in the appointment letter or company policy.; If an employee leaves without serving the full notice, the shortfall is often recovered in the full and final settlement, unless the company waives it or the notice is bought out.
Old and new tax regimes: India has two income-tax regimes for individuals. The new regime has lower slab rates but few deductions and exemptions; the old regime keeps deductions such as HRA and investment declarations.; The new regime has been the default since FY 2023-24, so an employee who wants the old regime must say so. The employer deducts TDS each month under the regime the employee chooses.
On Duty: In Verdeshell HRMS, On Duty is an employee's request, made in advance, to work a weekly off or a holiday, so that the day counts as work rather than a day off.; The manager approves the request, and once the day has passed it is settled as a comp-off or as paid overtime, according to the attendance policy. A missed punch on a normal working day is corrected with a regularisation request instead.
Payroll base days: Payroll base days are the number of days a month's salary is divided by to get a day's pay, which decides what one day of loss of pay costs.; Companies use the working days in the month, its calendar days, or a fixed 30 or 26. In Verdeshell HRMS, the company chooses the calendar month (working days by default, with weekly offs and holidays optionally counted in), a 30-day month or a 26-day month in Settings → Payroll Base Days.
Probation: Probation is a trial period at the start of employment, set in the appointment letter, after which the employee is confirmed, the period is extended, or employment ends.; Company policies often apply different rules during probation, such as a shorter notice period or limits on some leave types.
PT (Professional Tax): Professional tax is a tax on employment levied by some Indian states. The employer deducts it from salary each month according to the state's slabs and pays it to the state.; Not every state levies professional tax, and the slabs, months and annual totals differ by state; the Constitution caps it at ₹2,500 per person per year. The state that applies is the state where the employee works. In Verdeshell HRMS, the state PT slabs are maintained by Verdeshell, PT is worked out from the employee's work location, and the PT register is ready to download each month.
Regularisation: Regularisation is a request to correct an attendance record after the event — for example a missed punch or a wrong check-out time — which a manager approves or rejects.; An approved regularisation changes the attendance register, and so can change loss of pay, which is why requests should be settled before payroll is run.
TDS on salary: TDS on salary is the income tax an employer deducts from an employee's pay each month, based on an estimate of the employee's tax for the whole year.; The employer estimates the year's taxable salary under the regime the employee chooses, takes declared investments and exemptions into account, and spreads the tax over the remaining months. It deposits the tax, reports it quarterly in Form 24Q, and issues Form 16 after the year ends.
UAN (Universal Account Number): UAN is the 12-digit number EPFO gives every Provident Fund member. It stays the same for the employee's whole working life and links the PF accounts opened by each employer.; When an employee changes jobs, the new employer uses the existing UAN rather than creating a new one, so the PF balance can follow the employee. Employers quote the UAN for each employee in the monthly PF return (the ECR file). Verdeshell HRMS stores each employee's PF details, including the UAN, and uses them when it generates the PF ECR file.

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