How Can I Revise Our Salary Structure to Better Benefit Employees? Seeking Advice!

Dear All,

Currently, we are following the below-mentioned breakdown:

1. Basic
2. HRA
3. TA
4. CCA
5. FA
6. Medical Allowance
7. Special Allowance
8. LTA

The company has revised its salary structure. I am looking to adjust the salary breakdown to better benefit the employees. Please advise me on what other factors I can consider adding or removing from the current setup.

Thank you.

Dear Kavitha,

We are on the same lines as I have also restructured our salary structure recently. We have removed Medical Allowance (Medical All) and Travel Allowance (TA) from the list. Instead of TA, you can offer reimbursement based on actuals and can put a limit on the travel amount according to the job levels. As for Medical Allowance, most of the people submit fake bills to recover the amount. So, instead of that, you can opt for a mediclaim policy which will only cost an annual premium per employee in a year.

Hope this information might be of some help to you.

Regards,
Parul

Dear Parul,

Thank you for your response. What are the chances of increasing the food allowance and adding the uniform allowance? Here, the employees will benefit.

What do you say?

Kavitha

Dear Kavitha,

It really depends on whether you want to increase the company's costs or keep them constant. If the company is actually looking to increase employee salaries, you might consider implementing a slab-wise structure for such allowances. The higher the slab, the higher the allowance.

You could also consider adding a new category called "Grade Allowance." This would contain the allowance that an employee would receive whenever they are promoted one step up the ladder.

Regards,
Parul

Dear Parul,

Actually, we have increased the salary for the employees with effect from April 07. That is the reason why I am planning for a revision in the salary breakup.

Likewise, what is Grade Allowance? This is new to me. On what basis is the calculation done, and how will the employees benefit? Are there any other additions to the Grade allowance?

Thanks and regards,
Kavitha S

In that case, you may increase the other heads' amount. Grade allowance is not very prevalent but company-specific. We are planning to consider that as one of the components of our structure. You might or might not consider that. The slab will also be, likewise, company-specific. You may fix a range for the lowest grade, such as for moving from Exec to Sr. Exec or from AGM to GM level. The idea is to make the employees feel the worth of that position.

Hi, Kavithas,

At present, we are following the below-mentioned breakup:

1. Basic
2. HRA
3. TA
4. CCA
5. FA
6. Medical Allowance
7. Special Allowance
8. LTA

The company has revised its salary, and I would like to change the salary breakup to benefit the employee more. Please advise me on what other factors I can add or remove from the current structure.

TA - Travel allowance - it is taxable, so avoid it if possible. Instead, use a Conveyance allowance of Rs 800 per month.

CCA and FA are taxable. What is FA? Consider providing CEA - Children Education Allowance - a tax-free allowance with a limit of Rs 100 per child per month for up to two children.

Medical Allowance is taxable unless shown as reimbursement, payable upon submission of clear and valid medical bills. Maximum reimbursement is Rs 15,000 per annum.

Additionally, you can offer Sodexo Meal Coupons if available in your city, with an amount of Rs 1500 per month.

For senior management, consider a car lease with an arm's length transaction maintained by issuing the cheque in the car owner's name (not the employee's) with a 2.4% TDS.

You can also consider petrol reimbursement up to reasonable and genuine limits for different levels.

Hope this information is helpful.

Regards,

Rajat Joshi

Hi,

Can anybody tell me if:

1. Grade Allowance is taxable or not and is there any limit of exemption?
2. Sodexo Meal Coupons tax exemption limit?
3. CEA - Children Education Allowance - can it be availed by those who are single or by DINK members (Double income no kids)? In case an individual has a kid, do they need to show some proof?

Bye

Dear Kavitha,

It is indeed a nice piece of work. However, there are many other factors one needs to take into account before finalizing any specific pattern or structure of a salary system:

(1) The kind of industry
(2) Paying capacity of a particular organization
(3) Basic reward philosophy of the organization
(4) Government rules and regulations
(5) International practices as we are now in the era of globalization
(6) Income tax angle, which is of paramount importance

and many more.

From Prof. S.C. Ghosh

Hi Gayu_hr,

Grade Allowance is taxable. Is there any limit of exemption?

Yes, it is taxable.

Sodexo Meal Coupons tax exemption limit?

Circular on the FBT is silent on the same and expects a reasonable limit. Therefore, most companies provide Rs 1500 to 2500 per month.

CEA - Children Education Allowance - can it be availed by those who are single or by DINK members (Double income no kids)? In case an individual has a kid, do they need to show some proof?

CEA can only be availed by those who have children and is paid every month on the payroll. It is non-taxable, and at the end of the year, employees are expected to provide the school fees bill to claim the exemption.

Regards,
Rajat Joshi

Hi Rajat,

I found your posts informative. Can you please help with identifying all the components in a salary structure that are tax-free? I am aware of CEA, conveyance allowance, and medical reimbursement.

Which pay structure is the most relevant in the travel industry?

Could you also provide more information on the car lease policy that you mentioned?

Regards,
Parul

Dear all,

I need help with monetizing car allowance. Assuming the company allots:

- Car of net worth Rs. 6,00,000
- Driver allowance = Rs. 3500/month
- Fuel allowance = Rs. 5000/month
- Maintenance = Rs. 25000/year
- Insurance = Rs. 30000/year

If I have to calculate the car allowance for the CTC, how should I go about it?