Hi
While issuing appt. letter ( as per company policy) you need to work out the salary structure with various components like Basic, HRA, Conveyance, City Compensatory Allowance, Special Allowance, Medical Allowance, Gratuity, P.F. Employers' contribution and ESI Employers' contribution etc.
There are two components in payroll processing. One is monthly benifits and yearly benifits.
Again company to company it varies as per company's policy, whether all components of monthly pay attracts deduction based on number of days employee present during the month or only certain components are paid based on number of days present and other components are paid fully irrespective of number of days present.
As you know, P.F. is deducted on Basic and DA ( if such components is there) @ 12% and ESI is deducted @ 1.75% on the gross pay which includes all monthly components.
Further Professional Tax as per the respective state slab we need to deduct.
Then only his / her monthly net salary is arrived at.
Of course, there are other deductions such as Labour Welfare Fund, TDS etc.
This subject very vast one and I am trying to make it simple. In case you have any more doubt do revert back to me at [Login to view].
Rgds
Sampath