New to HR? Need Help Understanding Salary Deductions for a Small IT Team

Dear All,

I am Grishma, working as an HR with a private limited IT company with a staff of around 17 employees. I don't have experience in HR activities. I need to prepare salaries for all employees, so please, could anyone let me know what deductions should be made from their salaries? The basic salary of my employees ranges between 6500 to 15000. Kindly advise me on what deductions to make, in what proportion, and from which part of their salary. I am feeling very confused as the information I find on the internet varies greatly and adds to my confusion.

Please help. 🙁

Thanks in anticipation,

Grishma

9096120202

gmehta@remotecontrolmedia.com

Don't get panicked.
Do all the calculations on an Excel sheet.
Start by calculating the attendance of the employees for the month.
Firstly, enter the names of all the employees in a column and days in rows. Mark their attendance for every day. At the end, i.e., after the 30th of the month, put a formula to calculate the number of days present for every employee.
Next, based on the number of days they have attended the office, calculate the basic (assuming you have the salary details).
Following this, calculate all the other components mentioned in the salary breakup like HRA, CCA, Medical, etc. This entirely depends on your company's policy regarding the percentage of each component based on the basic. For example, HRA may be 40% of the basic. This will give you the net salary.
Subsequently, deduct 1) PF (12% employer and employee contribution), 2) PT based on the slabs, 3) ESIC if the salary is less than 10,000/-, and 4) Deductions for any loans taken.
I hope this helps.
If you have any queries, please revert back.
Regards,
Namrata

Hi Grishma,

As you are new to this field, you have done a good job by joining this site as you would get a lot of inputs here. You can get a lot of help from members of this community whenever required. You should calculate Basic first. Rest all other components of salary would depend on that (% of Basic) or could be a fixed component.

In case your company plans to function with the current strength (number of employees), then, you need not deduct PF. As per the Act, if there are 20 or more employees working or have worked in a year, then the EPF Act applies. You can make deductions for Income Tax as per the tax slab divided equally for the remaining period of the financial year.

You will have to take care of a few laws, especially governing wages/salary. You should pay the minimum wages as per the Minimum Wages Act.

Regards,
Santosh
hr.santosh@gmail.com

Hi,

Already well explained by dear friends... Prepare an Excel sheet. Enter the name of the employee, designation, and date of joining. Then write down the salary heads on actual days. Merge the two rows and write the actual salary heads on completion of a month below. In the above row, just formulate it so that after inputting the number of days, it calculates all the heads accordingly. After the calculation of the payment part, there comes the deduction part. The deduction part includes PF, ESI, Professional Tax if applicable, Mobile deduction, Loan or advance deduction, and Other deduction.

As you have only 17 employees, you shall be exempted from PF. However, if 10 employees are getting less than INR 10,000 gross salary, then ESIC shall be applicable; otherwise, it is exempted.

Regards,
Amit Seth.

What we follow in our company is as follows:

Gross Salary = Rs. 5000

Basic = 30% of gross Salary (i.e. Rs. 1500)

PF Deduction = 12% of Basic (i.e. Rs. 180)

Hi,

Thank you very much; I am very happy that I received so many replies. I will proceed accordingly and will share my success with you once I have made the payment. However, I still have one doubt: we are deducting 12% for the Provident Fund, but if I am paying a salary - Basic to the employee between 6500 to 10000, do I still need to deduct PF?

Once again, thank you very much for your great help and time.

Grishma
9096120202