Glossary

HR and payroll terms, in plain English

68 terms Indian HR and finance teams use every month, each explained in a sentence or two.

360-degree feedback: Feedback on an employee from several people around them, such as their manager, peers and team, as well as a self-review. It is often part of an appraisal. Performance
Agentic HRMS: An HRMS where AI agents carry out multi-step HR and payroll work, such as checking a payroll run or preparing an exit, instead of only answering questions. In Peoplo.ai, changes to pay, tax, people records and money always wait for a person. AI agents in Peoplo.ai
AI agent: Software that carries out a multi-step task on its own, such as checking a payroll run or preparing an exit settlement. In Peoplo.ai, agents prepare work and flag issues, and changes to pay, tax, people records and money wait for a person to approve them. AI agents in Peoplo.ai
AI assistant (HR): An AI assistant inside HR software that answers questions in plain words and drafts changes. In Peoplo.ai the assistant is called Kili: it works on every page, links every answer to its source records and prepares changes for a person to confirm. Features
Applicant tracking system (ATS): Software that manages hiring: job openings, applications, interview stages, scorecards and offers. Peoplo.ai includes an ATS with a public careers page.
Approval chain: The ordered list of people who must approve a request, such as a manager and then HR for leave, or finance for a large claim. Delegation lets someone approve while the usual approver is away.
Arrears: Pay owed for an earlier period and paid later, for example when a salary increase is backdated. Arrears are taxed in the year they are paid, and PF and ESI apply to them where they apply to the original pay.
Attendance regularisation: A request to correct an attendance record, such as a missed clock-in or work from a client site, so that the day is not marked as absent or loss of pay.
Attrition rate: The share of employees who leave in a period: people who left, divided by the average headcount, times 100. It is often tracked monthly and yearly, and split into voluntary and involuntary exits.
Basic pay: The fixed core of a salary, before allowances. PF, gratuity and the HRA exemption are all worked out from basic pay plus dearness allowance.
CTC (cost to company): Everything a company spends on an employee in a year: salary, allowances, the employer’s PF and ESI contributions, and often gratuity and insurance. In-hand pay is lower than CTC. Salary calculator
Dearness allowance (DA): An allowance meant to offset inflation, common in government and some private pay structures. It counts as wages for PF and gratuity.
Earned leave (privilege leave): Paid leave earned by days worked. Under the OSH Code, a worker who has worked 180 days in a year earns one day of leave for every 20 days worked; state shops and establishments acts and company policy can give more. Leave and attendance
ECR (electronic challan cum return): The monthly PF return an employer uploads on the EPFO portal, listing each employee’s PF wages and contributions. The PF for a month is due by the 15th of the next month. PF rules
EDLI: Employees’ Deposit Linked Insurance, a life cover scheme run by EPFO. The employer pays 0.5% of PF wages for it.
Employee self-service (ESS): The part of an HRMS where employees do things for themselves: apply for leave, download payslips, update details, submit tax declarations and claims, and clock in.
EPF (Employees’ Provident Fund): A retirement savings scheme run by EPFO. Employer and employee each contribute 12% of PF wages, compulsory up to a wage ceiling of ₹25,000 a month from 17 September 2026. PF rules
EPS (Employees’ Pension Scheme): The pension part of PF. Out of the employer’s 12% contribution, 8.33% goes to the pension scheme and the rest to the provident fund.
ESI (Employees’ State Insurance): Health and social insurance for employees earning up to ₹21,000 a month. The employee pays 0.75% of gross wages and the employer pays 3.25%. ESI rules
Exit interview: A conversation or survey with an employee who is leaving, to understand why and what could improve. It is part of the offboarding checklist.
Experience letter: A letter that confirms an employee’s role and dates of employment, given when they leave. New employers often ask for it during background checks.
Fixed-term employment: Employment for a set period under a written contract. Under the labour codes, fixed-term employees get the same pay and benefits as permanent staff doing the same work, and gratuity after one year of service.
Flexible benefit plan (FBP): A part of the salary that employees can split across allowances and reimbursements, such as meals, fuel or phone bills, to reduce tax under the old regime. Most of it gives no tax benefit under the new regime.
Form 16: The certificate an employer gives each employee showing salary paid and tax deducted for the year. It is due by 15 June.
Form 24Q: The quarterly return an employer files with the Income Tax Department, reporting tax deducted from salaries.
Full and final settlement (F&F): The last payment to an employee who leaves: salary to the last day, leave encashment, dues and recoveries. Under the Code on Wages, wages due must be paid within two working days of the exit. F&F checklist
Gratuity: A lump sum paid when an employee leaves after five years of continuous service, or one year for fixed-term employees. It is 15 ÷ 26 × last monthly wages × years of service, up to ₹20 lakh. Gratuity calculator
Gross salary: Total salary before deductions such as PF, ESI, professional tax and income tax. It excludes employer contributions that are part of CTC.
HRA (house rent allowance): An allowance towards rent. Under the old tax regime part of it is tax-free: the lowest of HRA received, 50% or 40% of salary, and rent minus 10% of salary. HRA calculator
HRIS: Human resource information system: software that keeps employee records and HR data. The term overlaps with HRMS, which usually also covers payroll, leave, performance and hiring.
HRMS: Human resource management system: software for employee records, leave, attendance, payroll, performance and other HR work in one place.
Human in the loop: A way of using AI where a person reviews and approves the AI’s output before it takes effect. It is how Peoplo.ai agents work.
Investment declaration: The employee’s statement at the start of the year of the regime they choose and, under the old regime, the rent, investments and expenses they expect to claim. The employer uses it to work out monthly TDS, and asks for proofs before the year ends. Income tax calculator
Labour codes: Four laws that replaced 29 central labour laws from 21 November 2025: the Code on Wages, the Industrial Relations Code, the Code on Social Security and the Occupational Safety, Health and Working Conditions Code.
Leave encashment: Payment for unused earned leave, usually on exit or at year end, according to company policy and state law.
LOP (loss of pay): Days of absence without paid leave. Salary is reduced for each day of loss of pay.
LWF (labour welfare fund): A small contribution from employer and employee, collected by some states to fund welfare schemes for workers. Amounts and due dates vary by state. LWF rules
Maternity benefit: Paid leave for a woman employee before and after childbirth: up to 26 weeks for the first two children, under the Code on Social Security.
MCP (Model Context Protocol): An open standard that lets AI assistants such as Claude or ChatGPT connect to other software. In Peoplo.ai each person can create a key so an assistant can work with HR data, limited to what their role allows.
Minimum wages: The lowest pay an employer may pay for a type of work, set by state governments by skill level and area. Under the Code on Wages, no state may set a minimum wage below the national floor wage.
Net pay (in-hand salary): What the employee receives in their bank account after all deductions.
New tax regime: The default income tax system, with lower rates and a ₹75,000 standard deduction but almost no exemptions. Taxable income up to ₹12 lakh pays no tax after the rebate. Old vs new regime
Nine-box grid: A three-by-three chart that places each employee by performance and potential. It is used in talent reviews and calibration to plan promotions, development and succession. Performance
Notice period: The time an employee or employer must give before employment ends, as set in the appointment letter or standing orders. It is often 30 to 90 days, and can be bought out or adjusted against leave by agreement.
Offer letter: A letter offering a job, with the role, start date, salary (often as CTC) and main terms. The appointment letter that follows sets out the full terms of employment.
OKR (objectives and key results): A goal-setting method: a few objectives, each with measurable key results, reviewed regularly, often quarterly with weekly check-ins. Performance
Old tax regime: The optional income tax system with higher rates but deductions such as HRA, section 80C, 80D and home loan interest.
Overtime pay: Pay for work beyond normal working hours. Under the Code on Wages, overtime is paid at at least twice the normal rate of wages.
PAN: Permanent Account Number: the 10-character tax ID issued by the Income Tax Department. Employers need each employee’s PAN to deduct and report TDS correctly; without it, tax is deducted at a higher rate.
Parallel payroll run: Running payroll in a new system alongside the old one for the same month and comparing the results line by line before switching over. Peoplo.ai’s Go-live hub includes one.
Payroll anomaly check: An automated review of a payroll run before approval that flags unusual results, such as a big jump in pay, a missing deduction or a new joiner without bank details. In Peoplo.ai an AI agent runs it and a person decides what to fix. Payroll
Payroll run: One cycle of calculating, approving and paying salaries for a period, usually a month, along with the statutory deductions and filings that go with it.
Payslip: The monthly statement of an employee’s pay: earnings, deductions such as PF, ESI, professional tax and TDS, and net pay. Employers must give a wage slip to each employee. Payroll
Probation: A trial period at the start of employment, often three to six months, after which the employee is confirmed. Notice periods and some benefits can differ during probation.
Professional tax (PT): A state tax on employment, deducted from salary every month in states that levy it. It is capped at ₹2,500 a year. PT by state
Reimbursement: Money paid back to an employee for business expenses they paid themselves, such as travel or client meals, against bills. Genuine business reimbursements are not taxed as salary.
Relieving letter: A letter confirming that an employee has been released from their duties and handed over their work, given on the last working day or with the full and final settlement.
Salary band: The minimum to maximum pay for a job level or role. Bands keep offers and raises consistent and show where each person sits in their range.
Salary structure: How CTC is split into parts such as basic pay, HRA, special allowance, employer PF and gratuity. The structure decides PF, ESI, gratuity and tax, so it is set with the labour codes’ wage definition in mind. Salary calculator
Shops and establishments act: A state law that covers registration, working hours, holidays, leave and conditions of work for shops, offices and other businesses in that state. Each state has its own act and rules.
Standard deduction: A flat amount taken off salary income before tax: ₹75,000 under the new regime and ₹50,000 under the old regime for FY 2026-27. Old vs new regime
Statutory bonus: An annual bonus the law requires for employees earning up to a wage limit set by the government: at least 8.33% and at most 20% of wages, depending on the company’s profits.
TAN: Tax Deduction and Collection Account Number: the 10-character number an employer must have to deduct TDS and file TDS returns.
TDS on salary: Income tax the employer deducts from salary each month, based on projected annual income and the employee’s chosen regime, and pays to the government by the 7th of the next month. TDS rules
UAN: Universal Account Number: the employee’s permanent PF number, which stays the same across jobs.
Variable pay: Pay that depends on performance, such as a bonus or incentive, as opposed to fixed salary. It is often shown in CTC at its target value, so actual pay can be lower or higher.
VPF (voluntary provident fund): Extra PF an employee chooses to contribute above the compulsory 12%. The employer does not have to match it, and it earns the same interest as EPF. PF rules
Wages (labour codes): Under the labour codes, wages include basic pay, DA and retaining allowance. If excluded allowances are more than half of total pay, the excess is added back to wages.