Explain how you get from an employee gross salary to their net pay.
What the interviewer wants to hear
- Start with gross earnings: basic, HRA, allowances, overtime, arrears
- Adjust for loss of pay and proration
- Subtract statutory deductions such as PF, ESI, professional tax and TDS
- Subtract other deductions such as loans or recoveries
- Net pay is credited to the bank and shown on the payslip
Model answer
I start with the fixed monthly earnings from the salary structure: basic, HRA, special allowance and any other allowances. Then I adjust for the month: loss of pay or proration for joiners and leavers, plus variable items like overtime, incentives and arrears. That gives gross earnings for the month. From gross I subtract statutory deductions. In India that is employee PF, usually 12% of PF wages, ESI if the employee is covered, professional tax according to the state, and TDS based on projected annual tax. Then I subtract other deductions, such as salary advance or loan recovery, canteen charges or notice recoveries. What is left is net pay, which goes to the employee bank account. The payslip shows each earning and deduction line so the employee can follow the same steps and understand the final number.
Can you answer it under time pressure?
Take a timed easy round and get scored on every answer.
More easy Payroll Specialist questions
- A new employee asks why their monthly take-home is much lower than their CTC divided by 12. How do you explain it?
- Walk me through how you prepare and run a monthly payroll.
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