How Do I Set Up HR Salary Slabs for New Entrants in the Infrastructure Industry?

Setting Up HR Salary Slabs for New Entrants

I have recently joined the infrastructure industry and need to establish new HR salary slabs for new entrants. I am looking for guidance on creating a salary structure for a 5 lakh per annum CTC. Please provide assistance and send any related information.

Regards,

Hi Ravi Sankar Iyer,

Good Afternoon!

I would like to suggest:

1. First, start with defining an HR Manual that contains all policies and formats for your new company. Ensure it is aligned with your business goals and, of course, with labor laws and necessary compliance.

2. Prepare procedures and process guidelines for HR depending on daily, weekly, and monthly requirements.

3. Create a departmental and company hierarchy chart to make people aware of the reporting structure. This will also ensure proper communication flow and obtaining necessary approvals for business decisions.

4. Seek necessary approvals from technical team members if you are designing something related to technical processes.

I hope that after completing the above exercises, you can start regular HR tasks such as recruitment, payroll, compliance submission, performance reviews, motivational activities, and grievance handling.

Regarding your first question about the CTC Breakup of 5 Lacs:

1. Basic = 16,667 (40% of Monthly CTC 41,667, you can consider it gross as well).

2. HRA = 8,334.

3. Conveyance = 800.

4. Medical Allowance = 1,250.

5. The remaining figure can be adjusted for Employer's PF Contribution, LTA, PT, and other allowances.

6. You may include gratuity if it is part of your company's pay structure.

Feel free to reach out if you need further information.

All the best.

Thank you, Mr. Maulik, for your kind guidance. We are in Uttar Pradesh (Noida) and working as a Probationary Management Trainee in Sales. I have allocated 50% of the CTC as Basic, following the HR manual (which was already prepared by my CEO prior to my joining). I have created a sheet that I am enclosing for your review to identify any missed or incorrect calculations.

Thanks,
Ravi

Revised Salary Structure Suggestions

Please find attached the revised sheet for the 5.0 and 3.5 Lakh packages as required.

Suggestions:

1) In your 5 Lakh salary structure, you will be paying 39,160.42 + 2,835 + 2,500 = 44,495.83 x 12 (months) = 533,940 CTC. It is showing the wrong CTC, higher by 33,940 yearly. You can make the same changes in the 3.5 CTC structure as well.

2) In your 3.5 Lakh salary structure, you have calculated Employer's PF (13.61%) on HRA, which is incorrect. It should be on Basic.

3) As per the latest amendments in PF laws, the PF Ceiling Limit has increased from 6,500 to 15,000. In the 5 Lakh salary structure, the Basic is above 15,000, so you may exclude PF if it is not required by the Employee. In the 3.5 CTC, PF becomes compulsory as the Basic is 14,584.

4) Even considering the ceiling limit, you may decide the PF max limit up to 1,800 (15,000*12% OR 15,000*13.61% = 2,042) if your company policy allows. This will lower your manpower cost without violating government laws.

Please revert in case you require any more information.

All the best!

Regards

Thank you for the right guidance and correct correction. Great help. Yes, I have mistakenly deducted the EPF with HRA for 3.5 lakh. Corrected accordingly.

PF Ceiling and Standard Deductions

If the maximum PF ceiling is 1800, shall we go with 1800 as the standard deduction of PF for 5 lakh (and above) CTC employees and add the difference with other allowances to balance CTC? Will that be right as per norms?

Employee Welfare Fund Deduction

My company would like to add an Employee Welfare Fund deduction (50% from employer and 50% from employee) for all in monthly salary to meet their emergencies. What are the limits, and is it under the tax exemption clause? Is there any ceiling for that? (The company wants to deduct 100-200/month). Our strength at present is 100+ and will increase up to 500 by the end of Sep '15 (by adding the project department, etc.).

Procedure for Releasing Funds

What is the procedure for releasing the fund to employees on request from accounts? Is it necessary to show the accumulation of the fund status to all on a monthly basis in their Salary Slip?

Please clarify for me.

Regards,
Ravi.

Dear Ravi Sankar Iyer,

Good evening!

Sorry for being away from Cite HR due to some professional engagements. I am responding to your query a bit late.

Answers to Your Queries

2) Yes, it's perfect as per PF norms if you contribute up to the PF ceiling limit of 1800. However, you can enhance it up to 12% of Basic if your employee (who draws a 5 Lakhs salary) wishes to avail the benefit for tax exemption.

3) & 4) Yes, you can draft a notification stating that you are going to introduce the "EMP Welfare Fund scheme" in your organization for employee benefits and send it to all concerned HODs. You may decide the amount as per company norms. I suggest referring to local government acts before making the final decision.

5) In my view, you are inquiring about Advance Salary. For that, kindly define a policy with approval from concerned authorities like CFO & CEO regarding the process, eligibility (e.g., old and confirmed employees only), approving authorities, max approval limit, etc. The management hierarchy chart will guide you in designing the process for obtaining approvals.

6) It's not necessary, but it's beneficial for transparency of your policies to disclose any deductions from an employee's salary for the accumulation of funds.

I hope your doubts are clear.

All the best.

Thank you, Mr. Moullik. Let me clarify a thing: if we deduct Rs. 1800/- as a standard deduction for EPF in employee contribution as suggested, what will the percentage be for employer contribution as compared to 13.61%? Will that also be Rs. 1800/- or something else? Can we apply this to the structure of 5 lakh and above as well? Please advise.

Regards,
Ravi.

PF Employer Contribution is 12%. Only 1.61% is an administrative charge that the PF authority takes for maintaining your account. Now, you can decide whether you want to bear this 1.61% charge as a company expense or include it in the CTC of the employee.

Yes, the same ₹1800/- amount can be adopted for the structure of ₹5 Lacs & above as well.

Regards,
Maulik Dave

Salary Structure for CTC Options

Can anyone help me with a salary structure CTC chart for a CTC of Rs. 40 lakhs per year with free housing and a car plus driver extra, or Rs. 45 lakhs whereby the housing and car will be subsumed in the 45 package? In allowances, maximum tax-saving should be considered in the calculation, and there is scope for all kinds of allowances like professional development allowance, book/journal allowance, servant allowance, newspaper & magazine allowance, medical allowance, and so on, apart from general allowance. Very urgent, please help me.

Hi all,

Can anyone help me with the CTC breakup for 14 lakhs per annum (Senior Designation)? How can we provide benefits to employees with tax advantages?