Why is a salary slip an essential document for maintaining financial wellness? How does it help an employee keep track of their financial fitness and is there a way it can be used to speed up easy access to loans? Does an employee really need this slip to file taxes accurately?
Before we dive deep into reasons why a salary slip is essential for financial wellness, lets look at what a salary slip means.
What is a Salary Slip?
A salary slip, commonly known as a payslip is a record of the salary of a person. It is a document that contains detailed information about a person’s salary. The payslip includes the complete breakdown of various components of the monthly salary. The salary slip or payslip is issued to the employer by the employee every month either in electronic form or printed hard copy.
As the salary slip contains specific information and components of a person’s salary, it acts as an essential document. It serves as the record of the wages of a person. A person might need his salary sleep while applying for a new job, for a loan or mortgage. It also acts as proof of the employee’s salary given by the employer.
Generally, any employer would demand three months of salary slip from your previous employment.
Let us have a look into the various importance of a salary slip:
1. To Look for New Job Opportunities
People often shift jobs according to their convenience. They search for new jobs to earn a better amount of money from their previous job. In case, the person has got multiple offers; salary slip can play a huge role in deciding the job for which he should go.
The various components of the salary slip help the person to assess other job offers. The salary slip can be used as a base to do salary negotiations while applying for a new job.
2. To Avail Loans/Credit Cards
Every small thing in this world asks for money. You need money to fulfill all your needs and wants. Sometimes the money you are getting through your salary might not be enough. There are situations when you need extra money.
The situation might arise in the form of the dream of a new house, a car or a wedding. In such conditions, people generally look for loans from banks and NBFCs.
You should know that your salary slip can help you a lot while applying for a loan. Payslip is an essential document needed while applying for a loan. The lending institution asks for the payslip as it contains detailed information about the person’s income.
The detailed information on the income in the payslip determines the ability of the person to meet his debt obligations.
The salary slip plays a vital role while applying for credit cards as well. Your credit card issuer might look into your salary slip to check your monthly income. Payslips will help you in availing loans of more substantial sums so that you can use them very effectively for your benefit.
3. Income Tax Planning
Income Tax planning is a fundamental technique that is being practiced by a lot of people nowadays. Salary slip helps significantly in planning income tax and confirms some savings from them. You can find out more about the detailed explanation of the salary slip. It contains various components such as basic allowance, HRA (Housing Rent Allowance), transport allowance, medical allowance, travel allowance, etc.
All these components have got different tax treatments. If you know the value of separate components available on your payslip, you will be able to do some income tax savings in every financial year. Proper income tax planning acts as a significant financial aid if it is done correctly.
4. Proof of Employment
A payslip acts as an essential legal document. It serves as a legal proof of employment of an employee. It also acts as a legal document while looking for a visa. Not on this but a payslip can be submitted anywhere as a document where the information about your salary is needed. Hence, it should be kept safely for any of such needs.
5. Authentication of Salary Claims
Salary slip provides authentication to your salary claims when you apply for a new job or opt or higher studies. The admission authorities use your salary slip as a background check of your employment status. It will also help you in getting a hike in your new job over time.
Payslips are essential legal documents that are needed at every step of life. From the maintenance of the bank account to availing a loan, it plays an important role in the lives of people.
There is a particular format of a payslip; you must check the same and make sure it is according to the format issued by laws of the state.
A payslip usually presents your salary with a proper breakdown, including how much is being deducted as PF or ESI. You must confirm all the components of the salary lip are mentioned correctly with all the details to avoid any problem while availing the benefits.
The salary slip should contain the correct spelling of the employer’s name as it acts as a legal document. Any wrong detail might get you into trouble and hassles when a situation demands you to produce your salary slip.
Additionally, some of the employers also offer additional details on the payslip such as National Insurance Number, Pay rate, Tax code, and bonus.