Starting a New Job: How Do I Set Up the Best Pay Structure with My CTC?

Hi all,

I'm going to join a new company next week. In the job offer letter, they have asked me to set up a pay structure. Can anyone help me find the best structure? My CTC is 18333 per month.

I would be very thankful for your assistance.

Thank you,
Regards,
Ram

Hi,

Can anyone guide me on how to create a pay structure for the employees of my company? Also, could you provide an example of a pay structure? Please, it's urgent as I'm assigned to do this work at the earliest. I hope someone will help me.

Regards,
Rekha

Hi Rekha,

You can design the salary structure as hereunder:

PART 1 (Salary Sheet) per month

1. Basic 40% (of gross salary)

2. HRA 40% or 50% of basic salary

3. Conv. All 800 (minimum) as it is tax-free

4. Education Allowance 200

5. Washing Allowance 300

6. Special Allowance variable as per salary

There are other allowances like Heat and Dust Allowance, Attendance Allowance, Night Shift Allowance, City Compensatory Allowance, etc.

PART II (Reimbursement)

1. Medical Reimbursement Rs. 1250/- per month

2. Office Wear Reimbursement Rs. 2500/- per month

3. LTA as per block years i.e., 4 Two months Basic Salary

4. Food Coupons 15600 + service tax per annum

5. Gift Coupons 5000 + service tax per annum

6. Entertainment Reimbursement for Senior Management

PART III (Employer Share) part of CTC

1. P.F. 13.61%

2. ESI 4.75% (for ESI-covered employees)

3. Bonus as per rules

You should consult with the accounts department before finalizing the reimbursement structure for necessary arrangements and for more tax benefits through reimbursement.

Best Regards,

Rajesh Sharma

Hi Rekha,

I would like to thank Rajesh for his inputs. I just wanted to recommend a few changes in case you haven't discussed with the accounts department to finalize the structure yet.

Points 1 to 4 are perfectly fine. I would recommend avoiding points 5 and 6 as they would be taxable.

Point 2 would be taxable. Point 6 would attract Fringe Benefit Tax on the part of the company. Please check the comfort level on their part.

Rajesh, I hope you are in agreement with the above points. Please share your inputs.

Thanks and best wishes,
Rajat

The rest is all fine.

Hi Rajat,

Thank you for your comments.

Although the Washing Allowance is taxable, the ESI is not applicable to the Washing Allowance.

In the case of Special Allowance, it can vary to adjust the salary.

Most companies set their basic salary between 40% to 50% because a higher basic salary increases the liabilities on the part of the employer. Therefore, it is advisable to keep the Basic Salary between 40% to 50% and allocate the rest to allowances.

Regarding Office Wear Reimbursement, it is exempt from tax, and the items covered under this category include i) Attire, ii) Ties, iii) Shoes, iv) Socks, v) Tailoring Charges.

For more clarity, please refer to the following:

Section 10(14)(i) of the Act allows an exemption for any special benefits or allowances granted to meet expenses wholly, necessarily, and exclusively incurred in the performance of office duties or employment. Rule 2BB(1) specifies the following allowances:

(a) Allowance for travel expenses on tour or transfer;
(b) Daily allowance for employees on tour or during transfer;
(c) Conveyance allowance for official duties, excluding free conveyance by the employer;
(d) Helper allowance for duties of office or employment;
(e) Academic, research, and training allowance for educational institutions;
(f) Uniform allowance for work attire.

It is evident that under clause (c), the conveyance allowance is exempt if free conveyance is not provided, while under clause (f), the uniform allowance is eligible for exemption. However, the professional development allowance does not qualify for any exemption. It is important to note that the conveyance and uniform allowances are only exempt to the extent of actual expenditure.

Regards,

Rajesh Sharma

I am working in a private company in Chennai, and I am the HR executive here. I want to know the pay structure that would be applicable in Tamil Nadu. What would be the percentage of basic in gross, HRA in gross, and conveyance allowance in gross? What are the necessary allowances in the pay structure? Additionally, is the special allowance covered under PF Rules?