Guide
Statutory payroll and leave glossary
The terms HR and payroll teams meet every month — defined in plain language, with a worked example for each so you can sanity-check what your HR payroll software outputs.
Definitions and worked examples
- EOBI (Employees' Old-Age Benefits Institution)
- A statutory old-age benefit contribution derived from minimum wage rather than actual salary. Example: with a minimum wage of 37,000 and a 1% employee rate, the employee deduction is 370 per month, while the employer contributes its own configured percentage.
- PESSI (Provincial Employees Social Security Institution)
- Provincial social security cover for employees earning under a wage limit. Example: at a 6% employer rate on a 25,000 wage ceiling, the monthly employer contribution is 1,500 per eligible employee.
- Provident Fund
- An optional long-term savings deduction, usually a percentage of basic salary, often matched by the employer. Example: 8.33% of a 100,000 basic salary is 8,330 deducted per month and held in the fund.
- Gratuity
- An end-of-service benefit accrued over time, commonly one month of basic salary for each completed year of service. Example: 6 years of service on a 90,000 basic salary accrues 540,000.
- FBR progressive tax slabs
- Income tax calculated on annualised taxable income against a bracket table, then divided across pay periods. Example: a 150,000 monthly salary annualises to 1,800,000; tax is computed on that figure and one twelfth is deducted each month.
- Medical allowance exemption
- Medical allowance is typically exempt up to 10% of basic salary when the employee is not covered by insurance, and fully taxable when they are. Example: on a 100,000 basic, up to 10,000 of medical allowance is exempt.
- PTO (paid time off)
- Any leave taken while still being paid — annual, casual and sick leave in most policies. Balances accrue monthly or annually and may be capped, carried forward or encashed depending on policy.
- Leave accrual
- The rate at which leave balance builds up. Example: an entitlement of 18 annual leave days accrues at 1.5 days per completed month, often withheld during probation.
- Proration
- Adjusting pay or entitlement for a partial period. Example: a joiner starting on the 16th of a 30-day month receives 15/30 — half — of monthly gross pay.
- Payroll reversal
- Cancelling a completed payroll run while preserving the original totals and a reason for audit, so the month can be recalculated and run again cleanly.