Question

In order to accurately calculate an employee's pay, it is important that payroll clearly understands the different types of employee remuneration. In your own words, list and define the four categories of employment income, providing an example (other than regular pay) for each category.

Answer 1

The foremost and most important category of employment income is the regular pay. However there are many other categories of employment income made available to the employees, other than the regular pay. Such types / categories of employment income can be any or more of the following:

Sl. No.	Category of employment income	Examples
1.	Bonus, variable pay, performance linked compensation	Many firms pay bonus, variable pay and performance linked pay once or twice the year based on the: Company's performance Individual employee's performance Common examples will be EVA Linked Variable pay scheme, EBITDA linked variable pay scheme that may manufacturing and services company follow. Employees stock option plan (ESOP) is another example.
2.	Allowances	Many allowances are given to the employees in addition to the regular pay. Some examples of sucha allowances are: Leave travel compensation allowance: Medical allowance Education allowance House rent allowance Meal coupons
3.	Group insurance, mediclaim policies	Many companies enter into group insurance or mediclaim policies covering all the family members and pay the premium for such policies on their own. Spouse mediclaim allowance; health check up reimbursements; medicine bills reimbursements, hospital admission fees reimbursements are common example.
4.	Retirement benefits	Such benefits are made available to the employees at the time of retirement. Examples here will be: gratuity, life long membership of any health club, lifelong membership of a golf course, pension benefits etc.