New to HR: How Do I Design the Best Salary Structure for My Company?

Dear All, How are you? I have recently joined one of the leading engineering companies in the HR Department as an HR Officer. I am new to the HR field, and I know HR is like the sea.

Understanding Salary Structures

I don't know about salary structures, and I want to know what a salary structure is and which is the best salary structure for an organization. If possible, please also let me know why we should provide the best salary structure to employees.

Please help me because I have to implement the best HR policy as soon as possible in my current organization.

Hoping for your favorable reply.

Thanks,
Disha G.
HR Officer

Suggestions for Creating a Salary Structure

I can suggest general options. Keep the salary structure department-wise. Study three organizational salary structures before devising one. Define some standard parameters like stability, job demands, basic requirements, personal care, refreshment, etc. You may know better and align these standard parameters with the job salary structure. Keep a matrix for the future and how it works. That way, you are taking care of most of the things.

Regards,
Anuj

With reference to the salary structure, it totally depends on the organization's policy. A standardized way to structure this includes the components: BASIC, HRA, MA, TA, GROSS, ESI, PF, and NET. If needed, seek advice from your reporting person or top management before implementing any changes.

Thank you,

Sweta Khan

Key Components of a Salary Structure

There are four important things that should be clear in a salary structure:

1. Gross Salary
2. Basic Salary
3. Cost To Company (there is no legal definition of CTC)
4. Net or Take-home Salary

- Gross Salary: Total including all allowances
- Basic Salary: Actual Basic + VDA
- Cost To Company: Gross Salary + Other expenses or liabilities borne by the Organization
- Net Salary: Gross Salary - Employer's deduction

Basic Salary (actual basic + VDA) is initial, and remaining allowances depend on the organization. They may include:

- HRA
- Medical Allowance
- Professional Allowance
- Additional Allowance
- Special Allowance

Thank you.

You should finalize the organization structure. This means basic gradings as Senior Management (VP/SGM, GM), Middle Management (DGM, Sr. Manager, Manager, Dy. Mgr), and Junior Management (Asst. Mgr, Sr. Officer/Exec, Officer/Exec, Jr. Officer/Jr. Exec).

Once this is done, based on the existing salaries and experience, slot each employee into one of the above cadres (there are 11 cadres mentioned above, from VP to Jr. Exec). The basic salary (and the DA/HRA based on the basic) will be the same for all placed in the same cadre. For example, the basic salary will be the same for all Assistant Managers irrespective of their departments. Statutory requirements (like EPF/ESI/Gratuity), which are also based on the basic + DA, will be the same.

Special allowances (like Mobile Allowance, Site Allowance, etc.) will differ between each department based on the hardships faced by employees in each department.

Regards,
Rajusiachen

Understanding CTC Breakup and Reimbursement Components

My name is Kumar Krishnan, and I have recently joined this site. I have been processing payroll and would like to understand the breakup of CTC designed for any employee, along with reimbursement (non-taxable components). I come from an advertisement company and would like to know the percentage of salary components towards Fixed, Variable (CTC), and others such as Gratuity, General Insurance, and Company PF. I am looking for packages ranging from 4.00 Lac PA to 1 Crore + PA. If anyone has the same in Excel with formulae, please share. I should be able to incorporate only the CTC figure; the rest of the breakup should be automatically plotted.

Please help with the above, or any suggestions would be appreciated.

Fixed Components

For Fixed Components, there are only four components: Basic, HRA, Conveyance, Special Allowance, Ex-gratia, and others.

Reimbursement Categories

Regarding reimbursement, which category should employees be available for, or can we define it as per CTC for such employees for claiming expenses?

Variable (CTC Reimbursement)

For Variable (CTC Reimbursement) - Sodexo, Medical Reimbursement, LTA, Attire Allowance, Books and Periodicals, Petrol/Car Vehicle Maintenance, Mobile, and Telephone expenses.

Lastly, Gratuity, Company PF, and insurance expenses are part of CTC.

Regards,
Kumar Krishnan