How Do I Include LTA and Ex Gratia in Payroll Policy for an MNC? Need Guidance!

Dear Seniors, Please help me out, I am working on the payroll policy for an MNC company. I need your help on how to create it, considering components like LTA and Ex gratia in the salary breakup. I need guidance on how and when LTA and Ex gratia should be given to employees and how to calculate the same. Your prompt assistance on this matter is highly appreciated as I need to finalize the payroll policy for employees.

Regards, Preeti

Normally, LTA will be calculated at 10% on Basic + DA and it can be paid immediately after the calendar year ends (during the first week of January).

Ex-gratia and Bonus Calculation

Ex-gratia is otherwise known as a Bonus, which has to be paid as per the Payment of Bonus Act 1965. ₹3,500 is the ceiling limit for calculating 20% of the bonus, which is ₹700 per month. It can be paid to the employees during festivals like Ayudha Pooja, Deepavali, etc.

Regards,
Sree

Hi Preeti, in case you do not intend to pay yearly, you can divide the amount mentioned above by 12 and pay it as a part of your monthly gross salary component.

Thanks to both of you for your replies. I have pasted the salary structure (CTC) to understand more clearly. Please let me know how to calculate LTA & Ex-gratia for the same. Here, both are part of CTC, and gratuity is also included, deducting the same as a provision. LTA & Ex-gratia are not paid on a monthly basis, so what is the ideal time to pay them to employees, and is there any policy regarding this? Please share it with me (payroll policy).

Please reply ASAP.

Thanks,

Preeti

INR Per Month INR Per Annum

Monthly Payments

- Basic: 25,000
- HRA: 12,500
- Educational Allowance: 100
- Conveyance: 800
- Special Allowance: 12,398
- Phone Allowance
- Medical: 1,250
- Petrol Allowance
- Driver Allowance
- Reimbursement of Expenses

Monthly Gross Sub Total: 52,048 6,24,577

Annual Payments

- Ex-Gratia: 12,500
- LTA: 12,500

Benefits

- Provident Fund: 36,000
- Gratuity: 14,423
- Mediclaim
- Superannuation

Fixed Total: 7,00,000

Total Gross Salary INR. Per Annum: 7,00,000