Understanding Salary Breakup, Tax Implications, and Transitioning to Payroll Roles: Your Questions Answered

Hi, what is the salary break-up? How will the salary be divided, and is it mandatory to have a breakup? Also, please mention the percentage and the procedure for handling the entire salary structure.

A Few More Questions:

a. If a proprietorship consultancy pays cash as salary (not credited to an account), is it correct? Does the proprietor or owner have to pay any tax to the government or someone else? Kindly explain the procedure.

b. What are the different software used by big companies for HR salary and other HR functions?

c. Is it possible to transition from recruitment to a payroll executive role without prior experience?

Salary Breakup and Its Importance

Yes, a salary breakup is mandatory because it gives you a clear idea about your earnings and contributions. The salary structure is nothing but Basic + DA + HRA + Conveyance + other allowances minus your contributions (PF + ESIC + LWF + PT). If a proprietor is paying someone in cash, it means he is not showing your employment legally to the government, so he doesn’t need to pay any tax or contribution for that employee.

Software Used in Companies

Each company uses different types of software for their daily activities. It can be PAYROLL or anything else as per its needs. It is possible; you only need to keep on learning new things.

Regards,
Rashvi

Could you please provide me with a breakdown of a gross monthly income of 12,000? I would like to see the percentage breakdown for each of the following components:

- Basic
- Dearness Allowance (DA)
- House Rent Allowance (HRA)
- Conveyance
- Other allowances

Additionally, I would like to know the percentage of my contributions towards Provident Fund (PF), Employee State Insurance Corporation (ESIC), Labour Welfare Fund (LWF), and Professional Tax (PT).

Thank you.

Breakup of $12,000.00 Monthly Salary

Basic - $4,800 (40% of Gross salary)
HRA - $2,400 (50% of basic)
TA - $800
MA - $1,250
SA - $1,500
_____________
Total - $10,750.00 (net salary)
______________

Deductions:
PF - $576 (12% of basic)
ESI - $84 (1.75% of basic)
LWF - $5
PT - Not applicable

Please correct me if I am wrong.

Hi, thanks for the salary structure. Is there any percentage taken for all allowances from the basic wage? What is the percentage of contribution to PF you have taken? Please explain. Why should you deduct gratuity in the salary structure?

Regards,
P. Rajaganapathy

Just want one clarification: Is CTC meant to include the employer's contribution for PF/ESI, or should the employer pay separately from company accounts? Please give some suggestions on the same. Since I have come across one company where the PF/ESI contribution of the employer is being deducted from the employee's salary, i.e., from the employee's CTC.

Regards,
Yohan

Dear Yohan, I have attached an example of the "Pay Structure" for your reference. Should you need further clarification, please post your query accordingly.

Cheers!
Abhishek