Understanding Payroll Calculations: Can You Help Me Break Down the Basics?

Hello All,

Can anybody give me the details of payrolls, such as how to calculate them? What are the percentages used to calculate basic salary (Employee PF, Employer PF, Other benefits, Gratuity, HRA, Special Allowance, etc.)? How do you provide the breakdown in the payslips?

I still have many doubts regarding payrolls. Please help me in this regard.

Thanks, Mahadeva

Dear Mahadeva,

Nowadays, companies work on the CTC (Cost to Company) concept. The rule of backup varies from company to company as per their policy, but generally, the basic is kept at 40-50% of CTC, and HRA is 40-50% of Basic. Employer and employee PF are at 12% of basic, respectively, with 4% of basic as gratuity.

Your query is not very clear. I am still trying to answer you but request you to email me a clear question you have. Do you want to know about CTC backup or how pay slips are generated? Please clarify for an exact answer.

Regards, Shilpi

Shilpi,

Could you please explain the taxable and non-taxable components of CTC as well? How are components like Sodexo calculated or accounted for?

Thank you

Dear Mahadev,

Taxable & Non-Taxable components come into play when deciding on your Cost to Company (CTC). As you mentioned, Sodexo Coupons are benefits provided to employees, making them non-taxable for the employee. However, the employer is liable to bear fringe benefit tax on them. Similarly, any reimbursements provided to employees are non-taxable.

Medical expenses, Leave Travel Allowance (LTA), telephone expenses, or any other reimbursements are non-taxable. On the other hand, fixed and variable components of salary such as Basic salary, House Rent Allowance (HRA), Special allowances, and Performance pay are taxable income for the employee.

I hope this explanation helps you understand the various components of your salary.

Regards,
Shilpi

Hi,

I am attaching a salary breakup document that I have collected from HR Site. I hope it will be useful to you.

Regards,
Deepa

I am attaching the CTC calculator that I have developed for my company. You will find it handy and helpful in developing your system.

S. Gaur

Dear Sir,

Could you please provide information on the PF contributions for both the EMPLOYEE AND EMPLOYER? If my basic salary is 16,000/-, what is the contribution procedure?

Looking forward to your prompt response.

Regards,
K. Ravi Kumar
E-mail: kasinaravikumar@gmail.com
Ph: 09989111149
HYDERABAD.

Hello Shilpi,

Thank you for your efforts in clarifying my doubts. Could I have your contact details so that I can explain my doubts clearly? Sorry for the delay in responding, but I was unable to access citeHR yesterday.

Thanks,
Mahadeva

Dear Gaur Ji,

It is very nice, but there is a pitfall in the CTC calculation. If you calculate CTC for Rs 10,000 per month or less, the special allowance cell takes a negative value, resulting in a much lower final monthly salary figure. Additionally, when we try to modify it, the system prompts for a password.

If the above pitfalls are addressed, it will be much better.

Regards,
R Sudhakar

Sunil,

I have gone through the CTC developed by you and need to ask one question: in that, there are various components like basic, HRA, Allowance, etc. How have you calculated it, like how much should be basic? Basic = how much % of CTC. And then HRA, etc.

Vinita