How to Break Down a 20k Salary and Understand Legal Risks of Firing Employees Without Notice?

Hi,

Assuming that an employee's monthly salary is 20k, how would you calculate the basic, HRA, conveyance, and medical allowances? What percentage of the basic salary would be PF? Do we calculate HRA, conveyance, and medical allowances as a percentage of basic salary or based on any other criteria?

When a company/HR manager fires a full-time employee for non-performance or misconduct without prior notice, what could be the legal consequences? And how to avoid them.

I would appreciate your inputs.

Thanks, Javeed

Hello,

In a salary breakdown, you can have components such as Basic, HRA, Medical, Conveyance, Special allowance, etc. Medical and Conveyance have to be fixed at (1250 - 1500) and 800 is the maximum limit for each, respectively. Out of the Cost to Company (CTC), after deducting the Employer's contribution towards PF, Medical, and Conveyance, you can allocate 60% of the remaining amount as Basic, 50% of Basic as HRA, and whatever is left can be considered as Special allowance or termed something else as per your company policy.

PF is calculated at 12% of Basic. However, if the value of Basic exceeds 6500, a flat 780 is deducted as PF contribution. But this is not mandatory as some companies offer the option to deduct PF at 12% even at higher CTC.

I hope this information proves helpful to you!

Regards,
Anjali

Anjali,

Many thanks for your inputs. I really appreciate it. Now I got a pretty good idea of the salary breakup. I am planning to make my career in HR. I would be grateful if you could give me any good info you have on HR policies (leave policy, performance appraisal, etc.).

Thanks in advance.

Re: Salary Breakup

Assuming that an employee's monthly salary is INR 180,000 per annum, how would you calculate the basic, HRA, conveyance, and medical allowances? What percentage of the basic salary would be PF? Do we calculate HRA, conveyance, and medical allowances as a percentage of the basic salary or based on any other criteria?