Understanding Salary Breakups: Can Someone Explain the Abbreviations and Descriptions?

Would anyone help me explain the salary breakups of an employee along with its abbreviations and descriptions of each subheading?

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Major Components of Salary

The major components of the salary are as follows:
- Basic
- HRA (House Rent Allowance)
- DA (Dearness Allowance)
- Medical
- Transport
- Supplementary Allowances
- Merit Pay

Optional Components

Optional components include:
- Children Allowance
- Hostel Allowance
- Education Allowance
- Car Running Allowance
- Telephone Allowance

Thank you.

Supplementary Allowances

It depends on the salary. You should first cover the major component, then if any balance amount is due, it can be put as a supplementary allowance.

Merit Pay

It's an additional amount that can be deducted from an employee's salary and paid quarterly, half-yearly, yearly, or monthly. It is deducted so that the employee does not leave the job quickly.

Please let me know if you need further assistance.

Consider this method; it may help you.

Salary Breakdown Method

Consider 45% as basic on CTC. Consider 40% (Non-Metro) or 50% (Metro) on Basic as HRA. Consider Rs. 800/- per month as Conveyance Allowance (Tax benefit). Consider Rs. 1250/- per month as Medical Allowance (Tax benefit). The balance you can consider as Special Allowance or Other Allowances.

Regards,
Shashikanth.

Understanding Minimum Wages in Salary Structure

When it comes to salary structure, Minimum Wages are also to be discussed and understood because non-compliance or payment of salary below Minimum Wages is unlawful and can attract penalties to the employer. Every state has different Minimum Wages, and they are revised every six months, which needs to be checked regularly.

So whenever you design the CTC structure of new joiners or consider increments, promotions, or transfers, one needs to first check whether it complies with the Minimum Wages.

Regards,
Sumeet