The Payroll Allowance types are classified into many factors.
- Taxable
- Non-taxable
- Reimbursement
- Bonus
- Benefits
- Cost to the company
- Deductions
- Earnings
Let's check them one by one.
Taxable Allowance
It has to be taxed and the employee has to be pay taxes from his salary components. Allowances such as Basic pay, Dearness, Conveyance, House Rent, Education, etc.
Non-Taxable Allowance
Allowance which are like incentives and other bonus, special allowances, which are not taxed to the employees. in some cases, the government employees and senior employees are not charged with taxes.
Reimbursement
It's kind of encouraging allowance to the employees, like Travel, Telephone, Interest, Petrol, etc. Which are all reimbursement and connects to the payroll on monthly basis. its custom and varies each month based on certain factors. or fixed based on some formulas.
Bonus
This is almost similar to the Reimbursement, which helps to encourage the employees, It can be offered festival, or any success sharing, or special thanking though this.
Benefits
This is non cash allowance, which employee receive benefits like travel with business class, get free travel accommodation, It can be served mainly for government employees and privileged employees in a private company.
Cost to the company
which is also popular called as CTC. This is additional expenses for an employee, which company spends on them, like Insurance, medical benefits, accident and permanent or temporary disablement with benefits.
Deductions
Its deduction part such as Loss of pay, Taxes, Employee contribution on insurances, Advance Salaries, Loans, and etc.
Earnings
It's combination of Taxable, non-taxable, Reimbursement, and benefits, Which can be differ company to company, mainly it starts with benefit to the employees.
These are all the allowance types, which i know from the best of my experience.