How Can We Set Fair Salaries for Salesmen in Tamil Nadu While Avoiding Legal Issues?

Setting Fair Salaries for Salesmen in Tamil Nadu

We are registering our company for retail and wholesale two and three-wheeler spares shops and will be operating from multiple locations in Tamil Nadu. We are hiring salesmen and need to fix a salary for our employees. Since it is a startup, we need to set a fair salary for employees and consider the company benefits as well.

Tamil Nadu Minimum Wage Details

Tamil Nadu Minimum Wage in rupees per day w.e.f April 1, 2016, to March 31, 2017:
- Scheduled Employment: Shops and Commercial Establishments
- Basic Minimum Wages: 78.88
- V.D.A.: 143.35
- Total Minimum Wages: 222.23

Questions on Salary Structure

1. How to fix the fair salary for salesmen and avoid any legal issues?
2. For the suggested salary from question 1, how to create a salary structure where there will be mutual benefits for employees and the company? Design a salary structure where the base salary should be very low, and incentives (including attendance allowance, food allowance, performance allowance, and transport allowance, etc.) are emphasized.

Regards,
Pharthiphan

I did some research and created a salary structure. I request you to point out any flaws and suggest a perfect salary structure.

I did some research and created a salary structure myself. I request you to let me know the flaws and suggest a perfect salary structure. Your response would be of great help. I believe I am in the right place seeking help.

Regards,
Pharthiphan

Salary Structure Recommendations for Tamil Nadu

In my opinion, it would be better if you set the basic salary as a minimum based on the Basic & DA of the State. There are States in India where HRA is governed by State Acts, for example, West Bengal (Minimum HRA 5% of Basic & DA). I am not familiar with the specifics of your State, so please check the local regulations.

The basic structure may taper off; the higher the monthly gross salary, the lower the basic percentage of the monthly gross should be. However, at a higher level, it may be a minimum of 30% of the monthly gross. At a lower level, there is no need to include perks like conveyance, medical, etc., in the pay structure as the yearly earnings are not taxable. At a lower level, there may be two components: Basic & HRA. As the monthly gross increases, you should consider adding components like conveyance, medical, LTA, etc., for income tax savings. The PF authority usually suggests fixing the basic at a lower level, at least 50% of the monthly gross up to ₹15,000 basic (statutory limit). There are case laws regarding the bifurcation of minimum wages, but in that scenario, the monthly gross salary should not be less than the minimum wages.

Salary structures usually vary from organization to organization depending on the nature of the business, prevailing market rates, minimum wages, and statutory costs such as PF, ESI, Bonus, etc. There is no fixed formula to determine the salary structure. If you need any further clarification, please contact me.

Regards,
S K Bandyopadhyay

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