PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
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Your Question is : Please suggest about the salary structure. How much basic salary and other allowance % should be in gross salary.
This is a question basically to be answered internally as per your Compensation Policy of the Organization. The Paying capacity of the Employer, the Legal or Statutory requirements, the hiring power you have and the role importance and so on. High valued jobs will attract more salary and attractive components and lower skilled jobs will attract Minimum levels of wages and so on which is big subject the Compensation and Benefit Manager has to derive in line with deeper discussion with the Business Leaders.
As a general guidelines kindly take the inputs as below :
A) Basic Salary : The Basic salary is the important component in the salary structure which is to be fixed judiciously as most of the statutory benefits will be on this components as it is included for deduction of PF, ESI as well Gratuity and so on along with other key components. The Basic salary may be comprising of 35-50 % of the total salary.
B) Dearness Allowance - Dearness allowance is a certain percentage of the basic salary may be paid to employees, connecting to Cost of living index
C) HRA – A house rent allowance is paid to employees for meeting the cost of renting accommodation. The component may work out to 20% to 30% of Basic Salary depending on the location where the employee is posted to work.
D) Conveyance Allowance - Conveyance allowance is offered by employers to their employees to compensate for their travel expense to and from their residence and workplace.
E) Leave Travel Allowance - Leave travel allowance is eligible for tax exemption. It is offered by employers to their employees to cover the latter's travel expense when he or she is on leave from work.
F) Medical Allowance - Medical allowance is a fixed allowance paid to the employees of an organization to meet their medical expenditure.
G) Books and Periodicals Allowance OR Professional Development Allowance is paid for development of the employees.
H) Vehicle Hire Charges
I) Health Insurance Component / Premium
J) Performance Pay or Incentives
K) Bonus component as per Bonus Act or Voluntary Bonus
L) Other components as you may decide
You need to include the Statutory components like Gratuity. According to the Payment of Gratuity Act, 1972, gratuity is calculated as 4.81% of the basic pay. Most firms with a workforce of 10 or more employees come under the Act.
Employee Provident Fund : At least 12% of an employee’s basic salary is automatically deducted and goes to the Employee Provident Fund every month. The contributions are maintained by the Employees Provident Fund Organization (EPFO).
Professional Tax : Professional tax is a tax levied on the income earned by salaried employees and professionals which may be indicated in the Structure.
Perquisites : Fringe benefits are generally non-cash benefits given in addition to the cash salary which can be figured.
ESIC : If gross salary is below Rs. 21,000 per month, then the employer is required to cover the employee under ESI. The employer's contribution will be 4.75% of gross salary, whereas the employee's contribution will be 1.75% of gross salary.
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