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I am sharing Complete Details on Payroll, Salary & Compensation that I have collected through various sources

This result is efforts of many people who have used their expertise, time & hard work to explain the concept of compensation as simple as possible

Thank You


For various links to my posts, kindly visit the links provide herein below


Payroll Management

Human Resource is the most vital resource for any organization. It is responsible for each and every decision taken, each and every work done and each and every result. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards. The lucrative compensation will also serve the need for attracting and retaining the best employees.

Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness.

Components of Compensation System

Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of certain factors after analyzing the job work and responsibilities. Components of a compensation system are as follows:

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Types of Compensation

Compensation provided to employees can direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc. Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity.

Direct Compensation

Direct compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization. The monetary benefits include basic salary, house rent allowance, conveyance, leave travel allowance, medical reimbursements, special allowances, bonus, Pf/Gratuity, etc. They are given at a regular interval at a definite time.

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Indirect Compensation

Indirect compensation refers to non-monetary benefits offered and provided to employees in lieu of the services provided by them to the organization. They include Leave Policy, Overtime Policy, Car policy, Hospitalization, Insurance, Leave travel Assistance Limits, Retirement Benefits, Holiday Homes.

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Need of Compensation Management
  • A good compensation package is important to motivate the employees to increase the organizational productivity.
  • Unless compensation is provided no one will come and work for the organization. Thus, compensation helps in running an organization effectively and accomplishing its goals.
  • Salary is just a part of the compensation system, the employees have other psychological and self-actualization needs to fulfill. Thus, compensation serves the purpose.
  • The most competitive compensation will help the organization to attract and sustain the best talent. The compensation package should be as per industry standards.

Strategic Compensation

Strategic compensation is determining and providing the compensation packages to the employees that are aligned with the business goals and objectives. In today’s competitive scenario organizations have to take special measures regarding compensation of the employees so that the organizations retain the valuable employees. The compensation systems have changed from traditional ones to strategic compensation systems.

Evolution Of Compensation

Today’s compensation systems have come from a long way. With the changing organizational structures workers’ need and compensation systems have also been changing. From the bureaucratic organizations to the participative organizations, employees have started asking for their rights and appropriate compensations. The higher education standards and higher skills required for the jobs have made the organizations provide competitive compensations to their employees.

Compensation strategy is derived from the business strategy. The business goals and objectives are aligned with the HR strategies. Then the compensation committee or the concerned authority formulates the compensation strategy. It depends on both internal and external factors as well as the life cycle of an organization.

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Evolution of Strategic Compensation

Traditional Compensation Systems

In the traditional organizational structures, employees were expected to work hard and obey the bosses’ orders. In return they were provided with job security, salary increments and promotions annually. The salary was determined on the basis of the job work and the years of experience the employee is holding. Some of the organizations provided for retirement benefits such as, pension plans, for the employees. It was assumed that humans work for money, there was no space for other psychological and social needs of workers.

Change in Compensation Systems

With the behavioral science theories and evolution of labour and trade unions, employees started asking for their rights. Maslow brought in the need hierarchy for the rights of the employees. He stated that employees do not work only for money but there are other needs too which they want to satisfy from there job, i.e. social needs, psychological needs, safety needs, self-actualization, etc. Now the employees were being treated as human resource.

Their performance was being measured and appraised based on the organizational and individual performance. Competition among employees existed. Employees were expected to work hard to have the job security. The compensation system was designed on the basis of job work and related proficiency of the employee.

Today’s Modern Compensation Systems

Today the compensation systems are designed aligned to the business goals and strategies. The employees are expected to work and take their own decisions. Authority is being delegated. Employees feel secured and valued in the organization. Organizations offer monetary and non-monetary benefits to attract and retain the best talents in the competitive environment. Some of the benefits are special allowances like mobile, company’s vehicle; House rent allowances; statutory leaves, etc.

Payroll Management Process

Calculation of gross salaries and deductible amounts is a tedious task which involves risk. Some of the organizations use the traditional manual method of payroll processing and some go for the advanced payroll processing software. An organization opts for any of the following payroll processing methods available

Manual System

Manual payroll system is the traditional payroll system which involves pen and ink, adding machine, spreadsheet, etc instead of computers, software and other computerized aids. The process was very popular when there were no computerized means for payroll processing.

Now-a-days it is only few small scale organizations in the remote areas that use the manual payroll. Sometimes the construction industry and manufacturing industry also use the manual payroll systems for the contractual labour, as theses contracts are on daily/weekly basis.

There is full control in the hands of owner. But the process is tedious, time consuming and risky as it is more prone to errors.

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Accountant is a professional having a degree/diploma course in finance/accountancy. He/she is responsible for all the activities related to payroll accounting. He/she has the sound knowledge of accounting principles and globally accepted standards.

The process adds costs to the organization. It involves paying someone who is responsible for calculating the salaries of others. The financial control regarding salary goes in the hand of accountant.

Payroll Software

In today’s computerized environment, payroll system has also developed itself into automated software that performs every action needed by the payroll process. It helps in calculating the payable amounts and deductions very easily. It also helps in generating the pay slips in lesser time. Automated calculations result in no errors. Data is validated automatically by the software.

It needs professionals to make use of the software for its efficient working.

Payroll Outsourcing

Payroll outsourcing involves a third party (an outsourcing company) in the calculations of salaries and deductions. The outsourcing organization is responsible for all the activities of the payroll accounting. It saves time and cost for the organization. If there is more number of employees (say more than 900-1000) in the organization, payroll outsourcing would be very much beneficial.

The data is provided to the consultants/outsourcing firms. The various payroll functions undertaken by the outsourcing organizations are as follows:

<ul>Analysis of Payroll records, payroll taxes

Medical claim processing

Employee Insurance & Provident fund processing

Attached Files
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File Type: zip SALARY WORD.zip (222.4 KB, 50720 views)
File Type: zip SALARY PDF-PPT.zip (3.03 MB, 28189 views)
File Type: zip SALARY EXCEL.zip (551.1 KB, 43573 views)
File Type: zip payroll & reward ppt.zip (1.29 MB, 18834 views)

very usefull information , pls continue the good work. hi any one having the IR Case studies - relating to strikes & lock outs
Hi, Thanks alot octavious. I have seen you with a great knowledge and would like to know more about u. Let me know ur background,the way u had improved urself,... Regards, buddy.
very good posting and thanks for the same . we all have gained much more information on pay roll than required. Thanks for sharing such a good posting............. Regards, Kavitha
Thanks Dear, This info is very helpful. But can you also tell me about the Cost of living analysysi in delhi as we want to start the City compensatory allownace in our company. REgards, Ruchika
Hi Octavious,
This is something Fabulous - The value of this work is known in dept to a person working in Payroll.
Thank you very much for the details concept of Compensation.
Thanks and Best Wishes,
Navroz Panjwani
HI! Your posts are really very helpful. I’m learning lots of things from u....Thanx once again... Regards, Gargi
Dear Octavious, Thanks for posting such a nice and elaborate info on payroll and salary. Where do you work? Let’s know more about you as we all need such a guide. Regards, Manish
Thanks for being so generous in sharing your knowledge with us.
This material will definitely come in handy for freshers & junior executives
who are aiming to build a career in the area of Compensation.
Thanks a Ton !!!!!!
Hi Octavious,
My name is Dinesh Yadav,
I am working in Admin as an officer administration,and I m very keen to get in HR as it is my field of interest to learn the techiniques and the legalities involved ,at present I am planning to do my BA in HR but Iwas not able to make it this time in several colleges like MET and Welings due to less score ,hene I am planning to do it from ICFAI.can you please guide me as what ezactly should I do to begin with now and any possibilities of doing it some other way.
Hello OctaviousI am trying to download the "compensation" files but when I open themI get an error. Could you mail me thses files (without zipping them)directly to my email ID :sambodhkaul@hotmail.comSorry for the trouble but I am having trouble opening zipped fileson my PC. Pease mail me these files, I really need them. Thanksfor your help and sorry for bothering you so much.Have A Nice Day !!!!Sambodh
Dear Octavious,
I seem to be the only person who cannot thank you since i cannot open any of the above documents. Would it be possible to mail me the same at ... or send me the password for the documents as some are asking for it??
i am doing my mba-hr project on compensation and benefits survey on general insurance industries. we need some questioneries to conduct this survey so pleasehelp me
i am pursing my mba-hr,my project is on compensation and benefits survey in general insurance industries. I need some questioneries to conduct this survey so please help me.
Thanks a lot. Really appreciaate the way u share your knowledge. It only goes to show that sharing knowledge is increasing knowledge. thanks a lot. julie
hi All
I require a small clarification what should be the salary structure for take home salary of 7500/- Rs
Pl help me out inthis matter
How should i consider the ESI (1.75%)
my companents
Basic 3000
HRA 1800
conveyance 1500
others 1200
NEt Home 7500
PT 80
What should be the ESI and PF Calculation for the above Package Pl heklp me out in this regard
Waiting for a reply
Thank you very much for sharing valuable information.
Can you please let me know your contacts(maild/number).
Looking forward to hear from you at the earliest.
Email id:
Dear Octavious,Very good collection. Must useful for all hr professionals.Regards,PBS KUMAR
Hello Everybody
Can anyone please email me the 3 files (unzipped) directly at my email ID:

The names of the files are:
Please please amil me the unzipped forms of these files because my PC is not allowing me to access zipped files. Thanks in advance.
very useful piece of information. Thanks a lot for sharing it with us.
hope you can guide junior members in other areas too in the same manner...
looking forward to some other useful information.
Dear Sir, I have a query. I have seen the LTA rules in your file. Are these rules applicable to privat organizations? or these are only for gove employees? kindly reply Regards, Deepa
Hello Everybody
Can anyone please email me the 3 files (unzipped) directly at my email ID:

The names of the files are:
Please please email me the unzipped forms of these files because my PC is not allowing me to access zipped files. Thanks in advance.
I am management trainee(HR) in a pharmaceutical Co. They hve asked me to prepare a project on compensation package i.e explaining each head in the compensation package.Could anyone please help me.
Awaiting for feedback.
Many Many thanks for the useful information with details. In some companies the CTC calculated as per EPF, ESI and BONUS of Employers contribution includes in CTC PACKAGE. Kindly provide calculatin sheet with the above option. So, this will felpful for all the companies as per thier option.
Basudeva Choudhury, Delhi
Mobile No. 9718390567
I want some Case studies on PF calculation any one can help me regarding this? Regards Ashi:confused::confused:
Hi, I have not been able to view the attachments. If possible could you please forward it to my email id . Also I wanted to know what is the crieteria for a firm to apply for a PF account. Is it any specified no os employees?
Dear Octavious

Thanks for such a useful and informative material bt apart from this i would like to know that wht is difference between payroll and compensation.


Dear Sir,
Thanks a zillion for this valuable post..... next, i wud like to get some suggestions from ur goodself as to what particular area i can focus on for my summer training project....
i hv just started my summers in a scheduled bank and like to work on compensation mgmt.. i wanna bring some thing really of substance on-the-table at the end of my project.....
Waiting sincerely for ur reply,
Syed Amir

Dear Octavious.
This and various other posts of urs have benefitted all of us CiteHR users kindly share some information about you with us as in who u r and what do you do.
How do you get to have knowledgebase of HR it is Amazing.
I have been benefitted a lot by your contributions.
Dear Syed
You have already choose the path that you wish to make your career. I would suggest if you wish to make remarkable stand in the field you have chosen, then Why not try some thing to be developed in sync with the 401K plan.
Instead of just purely concentrating on compensation and benefit, see it from larger prospective, I mean, try to involve more strategic financial management in compensation and benefit.
Thank You
Dear Sir,
Happy to get a reply from u....next, will u please explain it a bit further as to wat strategic application i can put into the topic... again..u hv mentioned abt the 401K plan.. wats it??? never heard it before...
Thanking in anticipation,
Syed Amir
HI Octavious,
It is a great stuff. I am AJITHAA HASAN MBA HR fresher, thanks for making me understand what happens in payroll department. I have few queries, how do the organizations fix up the salary (both monetory and non monetory benefits) for different levels? How do they segregate HRA, DA, Medical claim and non monetory benefits? How does the percentage of HRA, DA...... vary for each position? Do the organization need to stick to any standard format? Please clarify my doubt senior.
hi ..
thanks for the information..
i need to know more about compensation..actually what all factors we need to consider while drafting ctc..and how can we me it more cost effective and easy to understand...
its really wonderfull. thank you somuch sir.


Very Good Work. Keep it up.


iam not able to download your files properly. So please send those files to my mailling id . please sir really iam in need of your help this time. and its really urgent for me.
thanking you,
-haritha jyothi

Thanx a lot for the tremendous effort and the gracious act of sharing this.... it has humbled me....
Hi Octvious, Thanks for the information, its very useful for me as I dont know any thing abt payrolling. Pls keep posting on the same . regards, zooni
Dear Sir,Would like to know you more and would prefer to be your Student so that i can learn and empower more knowledge so that i can also help my company as well as other HR proffessional who come in future: My email id is
Hi Octavious,
Thank you so much for the valuble information that you have shared with everyone.However would you be able to provide me information on payrolling procedures and excel sheets that have to be prepared by an third party doing payrolling for their clients
Thanks for sharing the important information regarding the payroll. your help is highly appreciable.& also thanks to cite Hr for their contributions.

Dear Octavious,
It's a great stuff. You have covered everything related SALARY.
Please look in to the Tax calculation provided, it seems they are the previous year's tax rates.
Please do notice and make changes
would somebody be able to provide salary survey for the IT and NON IT Company according to years of experience and designation. Best Regards Manish
its really a good one. its very much useful.


I very good posting and thanks for the same .
we all have gained much more information on pay roll than required.
Thanks for sharing such a good posting if u have like that any thing of formulas please
Dear sir, I’m new to cite HR, i like to thank you for shareing your knowledge, and your quote is really meaningful and your doing it. regards edward
Dear Octavious,

It is really marvelous post. It carries complete information relating to HR. Thanks for sharing this useful post.


Asha Manjunath :icon1:

Dear Octavious,
I became a member yesterday and have already gained a lot as I am hooked to the information you have been providing in such a selfless manner. Its inspring to know that there are people who believe in sharing without expecting anything in return, which shows that you are a very secure person. God bless you.
Sandeep J
Dear Octavious
Really thnx and post is helpful and informative.

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