Compensation & Benefits Glossary
Compensation and benefits is the language of what a job actually pays — not just salary, but the full package of fixed pay, variable pay, statutory entitlements, equity, and perks that make up an employee’s total rewards. This topic gathers the compensation and benefits terms that matter most when hiring senior and specialist talent in India and across Global Capability Centres (GCCs), each defined in plain English on its own page.
Compensation in India carries its own vocabulary that trips up global teams: pay is usually quoted as Cost to Company (CTC) rather than base salary; statutory components such as Provident Fund (PF) and gratuity are legally mandated rather than optional; and the gap between gross and net pay reflects a specific set of deductions. Getting these terms right is often the difference between an offer that lands and one that is quietly declined — which is why this collection covers CTC structure, statutory benefits, and the equity and long-term-incentive terms (ESOPs, RSUs, deferred compensation) that increasingly decide senior offers.
For talent leaders and candidates alike, fluency here is practical rather than academic. Whether you are benchmarking a package against the market, comparing a GCC offer with a product-company one, or simply working out what a given fixed-and-variable split really means, the terms below give you precise, shared definitions to reason with.
39 terms in this topic · see all 277 in the A–Z glossary →
Terms 39
13th Month Pay 13th month pay is an additional payment equal to roughly one month’s salary that an employer pays to employees once a year, usually towards the end of the calendar year. In several countries it is a legal entitlement; in others, including India, an equivalent effect is achieved through a discretionary annual bonus rather than a statutory 13th-month rule. Read 401(k) A 401(k) is a US employer-sponsored retirement savings plan that lets employees contribute a portion of their pay before or after tax, often matched in part by the employer. The savings grow tax-deferred until withdrawal, usually in retirement. Read Affordable Care Act ACA The Affordable Care Act (ACA) is a US health-care law, enacted in 2010, that expanded access to health insurance and set rules for coverage. For employers, its key effect is a requirement that larger companies offer affordable, adequate health insurance to full-time employees. Read Base Salary Base salary is the fixed amount an employer pays an employee for their work, before bonuses, allowances, benefits, or other variable pay are added. It is the core, guaranteed component of compensation and the figure most other pay elements are calculated from. Read COBRA COBRA is a US law that lets employees and their dependants keep their employer group health insurance for a limited period after leaving a job or losing coverage. The individual pays the full premium themselves, so it is continuity of the same plan, not free cover. Read Compa-Ratio A compa-ratio is a compensation metric that compares an employee’s actual pay to the midpoint of the pay range for their role, expressed as a ratio or percentage. A compa-ratio of 1.0 (or 100%) means the person is paid exactly at the midpoint; below 1.0 means below it, above 1.0 means above it. Read Compensation Benchmarking Compensation benchmarking compares a role’s pay against the market — by level, location, sector, and skill — to set competitive, equitable offers and avoid both overpaying and losing talent. It replaces guesswork about pay with evidence drawn from comparable roles. Read Cost to Company CTC Cost to Company (CTC) is the total annual amount an employer spends on an employee in India — fixed pay, variable pay, benefits, and statutory contributions combined. It can differ materially from in-hand take-home pay, because it includes employer costs the employee never receives as cash. Read Cost-of-Living Adjustment COLA A cost-of-living adjustment (COLA) is an increase in pay made to offset rising prices, so that an employee’s real purchasing power is maintained as inflation erodes it. It is usually tied to an inflation measure and applied across a workforce or location rather than to individual performance. Read Deferred Compensation Deferred compensation is pay that an employee earns in one period but receives in a later one, such as bonuses, equity, or retirement contributions that vest or pay out over time. It is used to reward performance, encourage retention, and, in some cases, manage tax timing. Read Employee Assistance Programme EAP An Employee Assistance Programme (EAP) is an employer-funded benefit that gives employees confidential access to support services — most often counselling for mental-health, personal, and work-related problems, and often legal, financial, and wellbeing help too. It is designed to help employees address issues before they affect health or performance. Read Employee Stock Ownership Plan ESOP An Employee Stock Ownership Plan (ESOP) grants employees equity or stock options, aligning them with the company’s long-term value creation. ESOPs are a key lever in startup and senior GCC offers, giving employees a stake in the upside they help build. Read Fixed vs Variable Pay Fixed pay is guaranteed salary paid regardless of performance; variable pay — bonus and incentives — is contingent on individual performance, team results, or company outcomes. The variable share of total compensation typically widens with seniority, so senior roles carry more pay at risk. Read Fringe Benefits Fringe benefits are the non-wage extras an employer provides in addition to salary and legally required benefits, such as health cover, transport, meals, insurance, or wellness programmes. They are usually discretionary and are used to attract, retain, and reward employees rather than being mandated by law. Read Global Payroll Global payroll is the coordinated process of paying employees accurately and compliantly across multiple countries, each with its own tax rules, statutory deductions, currencies, and pay cycles. It combines a consistent central view of the workforce with correct local execution in every jurisdiction. Read Golden Handcuffs Golden handcuffs are financial incentives designed to make it costly for a valued employee to leave — typically deferred pay, unvested equity, retention bonuses, or benefits that would be forfeited on resignation. They bind an employee to the organisation by putting significant future money at risk if they quit early. Read Gratuity Gratuity is a statutory lump-sum payment an employer makes to an employee who leaves after completing a qualifying period of continuous service, as a reward for long service. In India it is governed by the Payment of Gratuity Act and generally becomes payable after five years of service. Read Gross vs Net Pay Gross pay is an employee’s total earnings before any deductions; net pay is what actually reaches their bank account after tax and statutory deductions are taken out. The gap between the two is made up of income tax, social-security contributions, and other withholdings. Read Maternity Leave Maternity leave is paid or protected time off that an employee takes around the birth or adoption of a child, safeguarding their income and their job during that period. In India the entitlement is set by the Maternity Benefit Act, which mandates paid leave for eligible women employees. Read Paid Time Off PTO Paid Time Off (PTO) is paid leave an employee can take away from work while still receiving their salary. In many US organisations it is a single pooled allowance covering holiday, personal days, and sometimes sick leave, drawn down at the employee’s discretion. Read Pay Compression Pay compression is when the difference in pay between employees becomes too small to reflect real differences in experience, performance, or seniority — for example, when new hires are paid almost as much as long-tenured staff. It erodes the logic of the pay structure and drives resentment and attrition. Read Pay Equity Pay equity is the principle that employees should receive equal pay for equal or comparable work regardless of gender, race, or other protected characteristics. In the US it is backed by laws such as the Equal Pay Act, and closing unjustified pay gaps is increasingly a legal and reputational priority for employers. Read Pay Grade A pay grade is a level in an organisation’s pay structure that groups together jobs of similar value or seniority and assigns them a defined pay range. Grades create an ordered ladder — from junior to executive — that governs how roles are levelled and how pay progresses across the organisation. Read Pay Transparency Pay transparency is the practice — increasingly required by US state and local law — of openly sharing information about pay, such as posting salary ranges in job adverts or disclosing pay bands to employees. Its aim is to reduce pay gaps and give candidates and staff clearer information about compensation. Read Payroll Cycle A payroll cycle is the recurring period over which an employer calculates and pays wages — weekly, fortnightly, or monthly. It sets when employees are paid and when the associated taxes and statutory contributions are calculated, deducted, and remitted. Read Provident Fund EPF The Employees’ Provident Fund (EPF) is India’s mandatory retirement savings scheme, into which both employee and employer contribute a set percentage of the employee’s salary each month. The accumulated balance, plus interest, is paid out on retirement or can be transferred or withdrawn under defined conditions. Read Relocation Bonus A relocation bonus is money an employer pays to help a new or transferring employee cover the costs of moving for a job — such as transport, temporary housing, and settling-in expenses. It may be a lump sum or a package of reimbursed costs, offered to make a geographic move financially feasible. Read Restricted Stock Units RSU Restricted stock units (RSUs) are a form of equity compensation in which a company promises to give an employee shares once certain conditions, usually a vesting schedule, are met. Until the units vest, the employee does not own the shares, and if they leave before vesting the unvested units are typically forfeited. Read Retention Bonus A retention bonus is a payment an employer offers an employee to stay for a defined period, often through a critical phase such as a merger, transition, or scarce-skills situation. It is typically conditional on the employee remaining employed until an agreed date. Read Salary Band A salary band is the defined pay range — with a minimum, midpoint, and maximum — that an employer sets for a particular role, level, or grade. It gives structure to compensation decisions, so that people doing similar work are paid within a consistent, benchmarked range. Read Say-on-Pay Say-on-pay is a shareholder vote on the pay of a company’s senior executives, giving investors a formal voice on executive compensation. It is a governance mechanism intended to hold boards accountable for how much, and how, top leaders are paid. Read Shadow Payroll Shadow payroll is a second, parallel payroll run in one country to report and settle the tax and social-security obligations of an employee who is actually paid from another country, typically an international assignee. It ensures compliance in the host location without paying the employee twice. Read Sign-On Bonus A sign-on bonus is a one-off payment offered to a new hire as an incentive to accept a job, paid on or shortly after joining. It is used to attract scarce talent, offset compensation a candidate forfeits by moving, or close a gap between the offer and the candidate’s expectations. Read Skill-Based Pay Skill-based pay is a compensation approach that ties an employee’s pay to the skills and competencies they have acquired and can demonstrate, rather than mainly to their job title or seniority. People earn more as they gain and prove new, relevant capabilities. Read Statutory Benefits Statutory benefits are the employee benefits an employer is legally required to provide under a country’s labour and social-security laws. In India they include contributions and entitlements such as Provident Fund, gratuity, employee state insurance, and paid statutory leave, as distinct from discretionary benefits the employer offers by choice. Read Superannuation Superannuation is a retirement savings arrangement in which an employer, and sometimes the employee, contributes money into a fund that the employee draws on after retiring. In some countries it is a mandatory system covering the whole workforce; in India it is a specific, usually optional employer-sponsored retirement benefit that sits alongside the mandatory Provident Fund. Read Tax Equalisation Tax equalisation is an employer policy that ensures an employee on an international assignment pays no more and no less tax than they would have paid had they stayed in their home country. The company covers the difference when the host country’s taxes are higher, and recovers it when they are lower, so the assignment is tax-neutral for the employee. Read Total Compensation Total compensation is the full monetary value of what an employee receives for their work — typically base salary plus variable pay such as bonuses and commissions, plus the value of equity like stock or ESOPs. It is the financial figure a candidate weighs when comparing offers. Read Total Rewards Total rewards is the complete package of financial and non-financial value an employer offers in exchange for work, covering base pay, variable pay, benefits, equity, and non-monetary elements such as career development and flexibility. It reframes compensation as the whole employment value, not just salary. ReadFrequently asked questions
What is included in a compensation and benefits package in India?
A typical package includes fixed pay (base salary), variable pay or bonus, statutory benefits such as Provident Fund (PF) and gratuity, allowances, and often equity (ESOPs or RSUs) and perks. It is usually quoted as a single Cost to Company (CTC) figure rather than as base salary alone.
What is the difference between CTC and take-home pay?
CTC (Cost to Company) is the total annual cost of employing someone, including employer PF, gratuity, and benefits. Take-home or net pay is what actually reaches the employee’s account after PF, income tax, and other deductions, so it is materially lower than the CTC headline.
Are provident fund and gratuity mandatory in India?
Yes. For covered employees both are statutory: Provident Fund is a monthly retirement contribution shared by employer and employee, and gratuity is a lump sum payable after five years of continuous service. They are legal entitlements, not discretionary perks.
How is a compensation glossary useful when hiring?
It gives hiring teams and candidates shared, precise definitions for every offer component, so a package is understood the same way on both sides. That reduces declined offers caused by confusion over CTC structure, variable pay, or equity.
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