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Need help finalising the components to be added to Salary in a CTC based compensation structure.

Do we need to include HRA, Food allowance, arrears, etc?

For the purpose computation of wage for Bonus calculation, the definition of salary is given below:

(21) “salary or wage” means all remuneration (other than remuneration in respect of over-time work) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment or of work done in such employment and includes dearness allowance (that is to say, all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living), but does not include-

(i) any other allowance which the employee is for the time being entitled to;

(ii) the value of any house accommodation or supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food grains or other articles;

(iii) any traveling concession;

(iv) any bonus (including incentive, production and attendance bonus);

(v) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force;

(vi) any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex gratia payment made to him;

(vii) any commission payable to the employee.

Explanation. – Where an employee is given in lieu of the whole or part of the salary or wage payable to him, free food allowance or free food by his employer, such food allowance or the value of such food shall, for the purpose of this clause, be deemed to from part of the salary or wage of such employee;

Reading into the RED coloured portion of the definition above, all allowances except specifically excluded items would form part of salary for the Bonus computation. But Item (1), coloured in green is slightly confusing, this would mean that all “Other” allowances would have to excluded. Also, the value of food coupons are included based on the explanation to the definition.

Dear Ampuran
Nowadays all the companies are paying more than the prescribed amount i.e., Rs.3500/-. The Basic Salary fixed is more than Rs.3500/-. Hence you can take the Basic wages into consideration and calculate the Bonus amount. Further All the Governments have also fixed the Minimum Wages above Rs.3500/-.

I am looking at adding the maximum components to the salary used to compute the limit, ie, Rs 10,000. Hence need clarification on whther HRA, Food allowance etc can be included when looking at the salary.
You cannot add HRA, Food Allowance (ii) the value of any house accommodation or supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food grains or other articles Attendance Bonus/sales incentive.
Please try to give the maximum benefits to your employees, so that they will give maximum output with optimum productivity in return.

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