What is Deduction ?
Deductions refer to amounts subtracted from an employee’s gross salary or wages. These may include:
- Statutory Deductions: Legally mandated, such as taxes, social security, provident fund, or health insurance.
- Voluntary Deduction: Chosen by employees, like contributions to retirement plans, charitable donations, or additional insurance.
- Company-Specific Deductions: Includes loan repayments, advances, or penalties for specific violations.
Deductions ensure compliance with legal obligations, personal financial contributions, and company policies while determining an employee’s net pay.
How HR teams use this term
HR teams usually use Deductions when they write policies, explain employee communication, review payroll or leave records, or keep employee data clean in an HRMS.