Is My Salary Calculation Wrong? Help Me Understand This Confusing Bonus Issue

I'm working in a domestic BPO (Data management) company located in Chennai, whereas the head office is in Ahmedabad, and all our salaries are disbursed from the HO. Our team consists of 350 staff members.

Please find below the salary structure prepared by our HO. Kindly let me know if the calculation and the salary structure are correct.

As per my understanding, the salary calculation is wrong because the bonus is calculated twice. Once it is added, and then in the next step, it is subtracted, so nowhere is the bonus effectively calculated.

Seniors, please solve my query and help me understand the above calculation. If it is wrong, I request you to please correct it and also help me understand it so that I can further discuss and correct it. If it is right, then please explain how.

Basic 25% 2053
HRA 50% 1027
SPL Allowance 4715.7
PF 12% 246
Bonus 8.33% 171.036
Gross 8213
ESI 1.75% 54
PF 24% 493
PT 80
Bonus 8.33% 172
Take Home 7414
ESI 4.75% 147

Regards,
Narinder

Salary Structure Clarification

Narinder, the basic salary should be 40% of the gross, HRA 50% of the Basic, and ₹800 for conveyance, which is common. The rest of the amount can be named as other/special allowance; these are earnings.

PF is 12%, ESI is 1.75%, and PT are part of deductions. For CTC calculation, the PF employer contribution of 12% and ESI of 4.75% will be considered.

Hope this clarifies.

Regards,
Giree

What Gireeshjayaram is trying to say is that the calculations are correct, and there is nothing to rectify. A bonus amount of 172 X 12, i.e., Rs. 2,064/-, will be paid to you once a year when the bonus is declared. For the computation of your CTC only, this figure is considered here. The rest of the calculation is okay.

Dear Narinder, Please see the correct calculation of your salary, and your take-home salary will be Rs. 7332/-. I think your salary breakup is incorrect. Please contact your HR Department. Let me know if you need any other help.

Salary Breakdown

Monthly (Earning) Deduction
2053 246
1027 137
4715 80

7795 463
Net Payable Monthly 7332

Bonus will be paid on an annual basis.
24% of PF will be deposited at the PF Department.
6.5% ESIC will be deposited at the ESIC Department.

Regards

It is okay, but not tax-friendly! What we do is we avoid special allowances which are completely taxable.

Please first tell me what you want to calculate: is it CTC or take-home salary? If it is take-home salary, then the formula provided by your corporate HR is absolutely correct. This formula is likely designed specifically to calculate the take-home salary for the candidate.

Calculating CTC

In the case of calculating CTC, you need to add all the components that the company pays on behalf of the individual, as listed below:
- Basic: 2053
- HRA: 1027
- Special Allowance: 4715
- Gross Salary: 7795
- PF (Employer Contribution at 12%): 246
- Bonus (8.33% of Basic): 171
- ESI Contribution by Employer (at 4.75% of Gross): 371
- PT: 80
- Gratuity (Basic * 15/26/12): 99

Total Cost to Company (CTC): 8762

Thank you.

Dear Mr. Ajay, Salary is calculated considering the take-home salary. However, I did not understand why in the initial stage, the bonus is added and then subtracted, resulting in the bonus not being calculated at all.

Our employer's Provident Fund (PF) is calculated at 25%. When I inquired about this with HR, she mentioned that it had been revised, and many other organizations are following the same practice. Unfortunately, she did not disclose when the employer's PF percentage was revised.

Regards, Narinder