Need Help Updating Our Salary Structure: How Do You Calculate and Break It Down?

Can anybody help me in computing salary? Right now, we have planned to change our salary structure, and I need some help with that. I would like to know the breakdown of the salary and how it is calculated, for example, 60% of the gross will be basic, like that, because the current structure we are using needs to be updated. I also want to know what the mandatory elements of the salary are.

Requesting your assistance...

Thanks,
Sowmya V

There is no industry standard on this. However, some uniformity can be achieved based on your requirements, affordability, competitiveness, and, of course, tax savings.

Attached are three slightly different structures. More options can be tested.

Regards,
Rajiv

Hi Rajiv, Thank you for the file. It was really helpful and gave a clear idea of the components of the salary. The percentage and derivation were also helpful.

Thanks again,
Sowmya V

I can assist you. You need to confirm if your intention is for the employee's take-home pay to be increased, correct?

Regards,
Suresh VVN

Hi Sowmya, please see the CTC breakup sheet of one level. I will give you another breakup sheet tomorrow.

Regards,
Suresh VVN
Payroll Manager

Hi Mr. Suresh, this is Santosh. I'm confused with the percentages used in all the calculations. Sometimes it is 50% of the gross to calculate the BASIC, and sometimes it is in the range of 45 to 60%. Does it always vary, or is there a perfect figure for all parameters like BASIC, PF, CON, and others? Is there any rule by the Government of India? Please let me know the details.

Thank you.

There is no specific rule for designing the salary breakup. It always varies from company to company. However, some points are common for all companies (i.e., HRA, Conv, PF & ESI, etc.).

Salary breakups purely depend on their Company HR Policies along with the Designations & Bands levels. Please see the comparison of Rs 160000/- CTC in the attachment below for your reference.

Note: Preparation of the Salary breakup sheet requires HR & Admin personnel to follow the below Acts:

1. For HRA, Conv, they need to follow the Income Tax Act 1961.
2. For PF, Provident Fund Act 1952.
3. For Employee State Insurance Act 1948.
4. For Bonus Payment, the Payment of Bonus Act 1965.
5. For Gratuity Payment, the Payment of Gratuity Act 1972.
6. For Minimum wages, the Shops & Establishment Act 1988.
7. For Professional Tax, Commercial Tax Act.

If you are still confused, please contact for further details at [Email Removed For Privacy Reasons]. Let me know if you need any further details.

Regards,
Suresh VVN