Understanding Salary Breakdown: How Are Basic, HRA, and Other Components Calculated?

Please provide me with a breakdown of the salary components. For example, if an employee's salary is 25,000/- per month, please detail the percentages for basic, DA, HRA, CCA, CA, MA, and OA.

Kindly confirm if the 25,000 is CTC or Gross Salary. Please let me know so that I can try to help you out.

Regards,
Asst Manager HR
Statutory Compliances

Hi Harshita, I'm interested to know the normal breakup pattern for Rs. 25,000 Gross/Month for a manufacturing industry. Please advise.

Thanks

Salary split-up varies from company to company. Basically, the government has set a format for salary breakdown, but this is only followed by government organizations and not by the private sector.

Regards,
D. Mohan.

I agree fully with D. Mohan; salary split-up differs from one organization to another. With my knowledge in Compensation Management, I can suggest that the best compensations are those that reduce the tax burden of individuals. Thus, the compensation structure generally changes as per the Annual Budget. For example, the abolition of Fringe Benefits played a huge part in redefining the compensation structure.

Basic Component and Related Allowances

Generally, there is a Basic Component (usually 30-50% of FCC - Fixed Cost to Company) to regulate the other salary components related to Basic like PF, HRA. HRA or Site Allowance (40-50% of Basic, can save Tax), Other Allowances (the list is huge, including Children Education (Max 2400), Medical Allowance (subjected to Max 15000 per year), LTA - Leave Travel Allowance (Max 1 month's Basic). There can be reimbursements as well, such as Fuel & Vehicle (Max 2 months' Basic) / Helper, etc.

Statutory Deductions

Other than these, there are statutory deductions like PF (12% of basic) and gratuity (4.8%), which are mandatory. The rest of the balancing figure is the Special Allowance OR Discretionary Management Allowance (can be named more aesthetically). Variable Pay/Reward Pay comes after this and is generally fully taxable.

I am just sharing some ideas. It's a complicated subject to address through emails. Compensation itself is a discipline in HR and is fast-changing. You need to formulate your organization's compensation after discussions with the Management.

Hope I have shed some light.

Thanks.

Regards,
Debapratim Guha

Salary Breakdown Guidelines

There is no hard and fast rule set by the government for salary head distribution. The basic salary should be kept above 50%, which means Rs. 12,500 or more. Dearness Allowance (DA) can range between 10% to 20%, i.e., Rs. 2,500. You can distribute the remaining components according to your company's culture of distributing salary heads. Reviewing some old databases of salary head distribution will give you an idea for the same.

I am forwarding herewith an example of a simple breakup of salary which may be helpful to you.

Regards,
Anil Desale
[Phone Number Removed For Privacy Reasons]

In my company where I am working, the structure is like this:

- Basic = 60%
- HRA = 25%
- Con = 15%

It then becomes gross. PF is 12% on basic contributed by the employer, then it becomes CTC.

Regards,
Maadhv Aptil