Setting Up Salaries for Our New ITES Company in Coimbatore: How Do You Structure Pay for Engineers?

We have set up a new ITES services company, and mostly engineers are working at different levels such as Design Engineer, Project Engineer, Team Member, and Project Managers. Please suggest a salary structure by sharing your company's salary structures. We are based in South India, specifically Coimbatore.

Hi Meenakshi,

CTC stands for Cost to the Company, i.e., the total expenditure of the company towards a particular employee. It includes every cost in terms of money and materials. Some of the components are:

- Gross Salary
- Bonus
- PF Contribution from the employer's side
- ESI or Medical contribution from the Employer's side
- Cell Phone Allowance
- Hard furnishing goods
- Food coupons

The contents of the salary breakup are as below. You can prepare it according to your own suitability.

HRA would be 50 or 60% of basic.

Basic

HRA

TA

Other Allowance

Mobile Reimbursement / Month

Gross Per Month = Sum of all the above.

Gross Per Annum = 12 * Gross/Month

PF Contribution = 12% of Basic/Annum

ESI Contribution = 4.75% of Gross/Annum

Medical = The mediclaim facility provided to an employee who is not covered under ESI, as the maximum ceiling for ESI is 10,000/Month. Getting more than this will be covered under Mediclaim or it depends on the company policy.

Annual Fixed Gross Cost = Gross/Annum + PF + ESI + Med

Ex-Gratia/Bonus = A fixed amount as Bonus

Annual Total Cost = AFGC + Ex Gratia/Bonus

Annual total cost is also called CTC.

Hope now it will be very much clear to you. If you have any queries, feel free to ask.

Regards,

Amit Seth

Hi Amit,

I'm having a doubt about HRA. In our office, we are providing 40% of the basic salary as HRA. Is that correct or incorrect?

Please clarify.

Thanks & Regards,
Sivaranjani Sriram

Hi,

For non-metro areas, the exemption of TDS in the case of HRA is only 40%, while in metro areas, it is 50%. However, it is up to you to assign even 50% to 70% as HRA. Since you are in Coimbatore, the exemption is at 40%.

Regards,
Bavani

Dear All,

Could you please forward your company's present salary structure as an attachment.

Regards

Hi,

This is the common structure that will serve as guidance for you.

BASIC - 30% of total CTC (It may go up to 60%, which is advisable not more than that).

DA - NIL (You can eliminate this as nowadays everything is worked on basic and it doesn't make any difference. If you prefer to have DA, ensure that the Basic and DA do not exceed 30% - 60%).

HRA - 40% of Basic in case of non-metro & 50% in case of metro.

Medical - ₹1250 per month (₹15,000 is exempted if an employee provides a bill; else, it is taxable).

Transport - ₹800 per month (it's fully exempted).

Uniform Allowance - ₹300 to ₹500 (any nominal amount to maintain uniform is exempted if you provide a uniform).

Educational Allowance - ₹100 per month per kid, and a maximum of two kids are exempted.

Hostel Allowance - ₹150 per month per kid, and a maximum of two kids are exempted from tax.

Flexi Allowance - any other amount can be included in this field.

Deductions:

PF - 12% of basic (both employer and employee).

LTA - 1 month of basic per annum (which will be paid to them once in two years and exempted once in two years if they provide bills).

Gratuity (compulsory if they complete 5 years of service) and superannuation are optional. If the company agrees, it can be deducted from the monthly salary.

Regards,

Bavani

Hi,

Please suggest which components of CTC and fringe benefits are exempted from tax (as per the financial Budget 2008-09).

Regards,
Neeraja