Confused About My New Salary Structure: What Does Special Allowance Really Mean?

I am going to join an MNC and I am getting a 50% hike in the new company. However, when I saw my salary breakup, I found that my Basic Salary was deducted compared to my last company's basic salary. Instead, I am getting a Special Allowance of 13,000 per month. Can you please help me understand if I will receive that on a monthly basis or if there will be any deductions? What does SPECIAL ALLOWANCE mean?

My Monthly Salary Breakup Includes the Following:

- Basic salary
- HRA
- CA
- Special Allowance
- Medical
- Bonus

Please help me out.

There is nothing to worry about regarding the special allowance; it is part of the wages. The special allowance has been introduced just to adjust the wages for CTC.

Understanding Special Allowance in Salary Structure

No need to worry much about Special Allowance, as 99% of private companies negotiate in terms of CTC. Special Allowance is just another component in your salary. Whenever you get a hike in CTC, there are chances to further increase this particular component.

This is different from Variable Pay (which is payable once a quarter or maybe monthly, subject to parameters like target achievement, performance rating, etc.).

Also, it has been observed that companies try to lower Basic to reduce the impact on the total cost per employee, as in India, most social security aspects are based on Basic. In addition to this, Notice Pay and Earned Leave Encashment are usually entitled at Basic.

Understanding Salary Components and Special Allowance

The salary attributes like Basic, HRA, Transport Allowance, Medical Reimbursement, LTA, Perquisites, etc., have a fixed upper limit based on statutory limitations and the individual's salary as well. Mostly, the salary breakup in many organizations would be CTC minus other attributes (Basic, HRA, Transport Allowance, Medical Reimbursement, LTA, Perquisites, Vehicle Repair, Books & Periodicals, Gratuity, Employer PF, etc.) will give you the Special Allowance.

In short, CTC minus all other attributes in the CTC equals Special Allowance.

Components of Salary Structure

- Basic: 30% of CTC
- HRA: 40% of Basic
- Conveyance: $800
- Medical: $1250
- Special Allowance: (Balancing figure)

Understanding Special Allowance in Salary Structure

Special Allowance is a balancing figure used to make the salary structure balanced. Most companies have their standards for determining the basic component of the total gross salary. Other components, such as HRA, depend on the basic salary. Medical is fixed at a maximum of 1250 (tax per se), TA (800), etc. To balance all these components, a special allowance is introduced. However, it is a taxable component.

Regards,
Haider