How Should Incentives Be Reflected in Payslips: Separate Column or Gross Salary?

Hi Seniors, I have recently joined as an HR for a private limited company in Hyderabad, which specializes in US IT recruitments. We will pay our employees their INCENTIVES every month. Until now, the company has not provided payslips (and employees have not asked for them). Moving forward, I aim to implement the practice of issuing payslips every month.

Moving on to my question,

Should we include those incentives in the Incentive's column or directly add them to their gross salary? (Based on my understanding, I believe we should display them under the incentive column as it will also impact the company's CTC.)

Please correct me if I'm wrong on this matter, and I truly appreciate all the input.

Thanks in Advance,
RAJ

Hi,

1. An incentive is the earnings of the employee and is not related to CTC.
2. Incentive is a variable component, not a fixed component, so show that the incentive part in the total earnings column as a variable part.
3. Incentive is not a fixed component for each month; it depends on the work performance of the employee.

Thank you.

I really appreciate your response and thank you so much for clarifying my doubt. Just to double-check on this scenario, we have the payslip as follows:

Earnings

- Basic Pay
- Medical Allowance
- Allowance
- CCA
- HRA
- Conveyance
- INCENTIVES (or should I mention it as variable pay or some other suggestions)

So, the INCENTIVES should be added, right? Please correct me.

Thanks in Advance,

Regards,
RAJ

Please add the incentive as a variable part in the salary slip. Just consider that the incentive is not a fixed component. If an employee does not reach the target, they will not be eligible for the incentive. Therefore, create an incentive column and indicate in which month the employee is eligible for it. Display this information in the salary slip.

I have joined as an HR for a Pvt Ltd company. We will pay our employees their incentives every month. Should we add those incentives in the incentive's column or directly add them to their gross salary? As far as I know, we should show them under the incentive column because it will affect the company's CTC. I want to know if we show incentives on the salary slip, do we need to deduct ESIC from the incentive? Will it affect PF, ESIC, or any other particular item on the payslip? Or should I mention the incentive just outside the slip separately?

Kindly correct me on this matter, and I really appreciate all inputs.

Thank you in advance.

Incentives and Monthly Gross Salary

If incentives are paid every month (e.g., production incentives, attendance incentives, safety incentives, etc.), they are part of the monthly gross even though they are variable pay. Variable Dearness Allowance (VDA) is paid by many Indian organizations, and the formula varies from organization to organization. It could be reviewed monthly, quarterly, semi-annually, or annually. It may be based on a percentage or per point of index neutralization and is a part of the monthly gross. In some organizations, House Rent Allowance (HRA) is part of Basic & DA, which will vary with changes in VDA. Additionally, there are House Rent Allowance Acts in some states like West Bengal and Maharashtra where HRA is a percentage of Basic & DA. Therefore, there is no direct correlation between variable payments and being a part of the monthly gross.

Employee State Insurance (ESI) and Payment Intervals

Regarding Employee State Insurance (ESI), any payment made at intervals not exceeding two months is considered for ESI coverage and deduction, irrespective of whether it is variable or fixed. It is evidently part of the Cost to Company (CTC) regardless of the payment term.

Thanks & Regards,
S K Bandyopadhyay (West Bengal)
USD HR Solutions
[Email Removed For Privacy Reasons]

But I have one ques, actually sir its sales incentive, and it is paid every month as per the target achieved by the employee. The employee is asking me to add the incentive to the salary slip. Sir, I have made two different types of salary slips and attached them for your reference. I would like to request you to please go through them and let me know which one is correct as per Maharashtra govt norms. Thank you.

You can add an incentive on the payslip by including an Incentive column and paying the incentive amount a few days after or before the salary payment. This way, the incentive will not be displayed with the net salary in the bank statement.

My boss gives me an incentive for payment recovery in cash, in addition to my salary in the bank. How can I reflect both on my salary slip? The incentive value changes every month based on the recovery amount. How should I display this on the salary slip?

Hi Experts,

What if we pay an incentive to any employee and don't show it on the salary slip? Is it okay to not show it on the salary slip? I think it will still be included in the total taxable income of the employee and will be shown on Form 16A. Please advise on the correct way to show it in accounts.