How Can We Create the Best Salary Breakup for Our Small Team's Consolidated Salaries?

Hi Everyone,

We started a new company in Hyderabad, and we are about a 20-people company. As of now, we were paying consolidated salaries ranging from 10,000 to 45,000. I need all your suggestions on how we can create the best salary breakup for their consolidated salaries.

Thanks in advance.

Hi,

The contents of the salary break-up are as below. You can prepare it according to your own suitability:

- 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 employees who are not covered under ESI, as the maximum ceiling for ESI is 10,000/Month. If the amount exceeds this, it will be covered under Mediclaim or as per company policy.

Ex-Gratia/Bonus = A fixed amount as a bonus

Annual Fixed Gross Cost = Gross/Annum + Ex-gratia

Annual Total Cost = AFGC + PF + ESIC

Annual total cost is also referred to as CTC.

I hope this clarifies everything for you. If you have any queries, feel free to ask.

Regards,
Amit Seth

Hi Amith,

Thank you very much for your reply. As we are new, if we want to implement PF for all the employees, what should we do at the employer's side. Please provide me these details.

Thanks in advance.

Srinivas

Hi Srinivas,

Welcome. It's a pleasure that it helped you in your work.

Find below the details regarding the new employer's obligation to get registered with ESI and PF.

The formalities for ESI are that you must have a staff of 20 employees, regardless of whether they are receiving a salary of more than 10000/- or less. The maximum ceiling of ESI contribution is up to 10000/- Gross/Month only. Those earning 10001/- will be exempted from ESI.

Yes, ESI and ESIC are the same. ESIC stands for Employee State Insurance Corporation.

The employer should register the factory or establishment with the ESI Corporation within 15 days of the applicability of the ESI Act. The registration declaration should be filled in Form 01, along with a separate sheet containing the name and address of the establishment, the number of employees, the nature of duty, and the name, designation, and address of the manager controlling such persons, for offices situated outside. Once the ESI regional office is satisfied with the application, they will allot a code number to the employer.

After that, you can register your employees with the ESI. They must fill out a declaration form (FORM 1), clearly stating Male or Female. All declaration forms should be countersigned by the employer.

Next, prepare a return of declaration in Form 3 separately for Male & Female within 10 days of filling out the declaration form.

Subsequently, every employee shall be allotted a temporary identification number.

To register with the PF department, the minimum number of employees required is 20.

Every employer of an establishment to which the Employee Provident Fund Act applies should submit in Form 5A (in duplicate) to the commissioner, particulars of all the branches and departments, owners, directors, partners if any, or any other person who is controlling its affairs within 15 days of the scheme's applicability.

Upon receipt of Form 5A, the commissioner shall verify the particulars submitted and, once satisfied, shall allot an Establishment Code No.

I hope it is now very clear to you.

Regards,

Amit Seth.

As part of the salary structure, include a variable portion of pay if you have performance-related targets. You can either include a fixed medical allowance or just make a provision for medical insurance. ESI is mandatory, but the services are not up to the mark.

Dear Amit,

Thank you for the really excellent answer to my query. Not only for me, but you have also provided a suitable answer to many people who have recently started companies and do not have dedicated HR staff or HR staff with little working knowledge.

Thanks again.

Srinivas