Building a Salary Structure for a Simulated Company: Where Should I Start?

Hello everyone, I am a student at university. Currently, we are working on a project where we are simulating a company. I am responsible for the HR department, and my task is to establish a salary structure.

I am uncertain about how to begin. What are the key points I should consider first? Could you provide me with some ideas or examples?

Thank you.

Key points in making a salary structure:

1. Basic Salary
2. HRA
3. DA
4. LTA
5. PF
6. Medical

In designing a salary structure, it is essential to consider these key components such as Basic Salary, House Rent Allowance (HRA), Dearness Allowance (DA), Leave Travel Allowance (LTA), Provident Fund (PF), and Medical benefits. Each element plays a crucial role in determining the overall compensation package for employees. By carefully structuring these components, organizations can ensure a competitive and attractive salary offering that aligns with industry standards and meets the needs of their workforce.

First, to create a salary, you have to know about salary. Salary is the amount paid to an employee for his service. The government has established a few rules on salary, such as the Minimum Wages Act, etc. There are several components in a salary:

Earnings:
- Basic: Minimum amount paid to an employee.
- DA (Dearness Allowance): Allowance paid to the employee along with the basic salary.
- HRA (House Rent Allowance): Given as an allowance.
- Medical Allowance
- LTA (Leave Travel Allowance)
- Conveyance
- Employer PF: An indirect monthly payment credited to the employee's PF account for future benefits (not considered part of the salary as per the PF Act).
- CEA (Children Educational Allowance)

These are a few components present in salary earnings.

In Deductions:
- PF (Provident Fund): 12% on basic salary
- PT (Professional Tax as per state)
- ESI (Employee State Insurance)

I hope this information helps you.

Regards

Thank you for your answers.

I am studying in Holland. I don't know the salary range in Europe. How many elements should be calculated in it, and how can I reduce the tax?

To create a salary structure, you need to first define salary grades and then distribute basic salary to those grades. Let's say your grades are (1, 2, 3,...10). The basic salary should overlap, which is the best practice in a grading system. For example:

- Grade 1 = Basic $1000 to $2500
- Grade 2 = Basic $2300 to $3500
- Grade 3 = Basic $3200 to $5000
- And so on...

The "from-to" range will establish three points of the salary: Minimum, Mid, and Maximum. Thanks...

Dear All,

Please find attached the Salary Structure format. This structure varies from Grade 1 to Grade 10.

Thank you.

I have attached a Wage Breakdown Structure (WBS) I created. After the different wage classifications have been created, one only needs to match a wage classification to each position on the organizational chart.

The next step after that is to calculate the total wage and benefit package for each employee using the wage classification from the WBS. Bhagwat Kadam attached a spreadsheet that shows the wages and benefits for many employees.

Because you are in Holland, you will have to research to find the typical benefit packages being offered in your country.

Hi All,

I need to devise a compensation package where the CTC is ₹10,00,000 to optimize tax savings. Kindly help me with showing a detailed breakup and the reasons how it helps in tax savings.

Thanks,
Atul Saboo

At first, you need to set up and define the salary grade, then set up the minimum basic salary for each grade. Of course, you must refer to the labor law and labor market.

Attached file for your reference Attachment 64327.

Hope this will help you.

TTLUONG:-D

Hi, I'm an undergraduate student and I need your help with this topic. I need some relevant questions that I can ask the HR manager during the interview. I am interested in how their company makes decisions on job design and pay structure. I hope you all can suggest some questions for me. I really need your help. Thanks!

Dear All,

I am working in the FMCG (dairy) industry in Saudi Arabia and I need to create a new salary structure for Saudi Arabia, UAE, Qatar, Oman, Bahrain, and Kuwait. Can anyone help me by providing new salaries or average salaries in the dairy industry in these countries, with the minimum, median, and maximum ranges according to our grading structure?

Grade 01ST 02ST 03ST 04ST 05ST 06ST 07SP 08SP 09SP 10MM 11MM 12MM 13SM 14SM 15SM 16EM 17EM 18EM 19EM 20EM

Thank you in advance, and I hope to receive your immediate positive response.

With best regards, MAQ

Hi, can anyone give me some idea of a formula to frame a salary structure with ESIC and PF benefits? Please, as I am new to payroll.

For the sake of the project report, all the above information sent by various persons is okay. But in reality, when framing a salary structure in today's competitive world, the following points need to be considered:

1. Geographical location.
2. Applicable minimum wages as per the Payment of Minimum Wages Act.
3. Requirement of manpower and availability of the required skill set in the area.
4. Comparative data of the salary structure of various categories in a similar industry.

Regards,
R D Watve