Starting an IT Company: How Can I Structure Salaries for Mutual Benefit?

I am planning to open a new IT company. Can someone please let me know how to break up the salary structure of the employees so that the company also gets the best benefit possible, and the same applies for the employees. We do not have any PF or medical allowance for the employees, so please help me with this.

Hiring the Right HR Professional

The best approach for you is to hire an HR person who has the necessary perspectives and the right skill sets to align all HR requirements. The latest trend is to offer a competitive salary based on industry standards in that region, plus Variable Performance Pay yearly. You should consider PF and other applicable regulatory schemes from the beginning and have a flexible pay package formula based on Cost To Company considerations.

If the volume of work is not high at the moment, you should still consider hiring an HR manager, or you can hire a senior consultant to design an HR manual. This person will support building HR in the right shape, strengthening the People Pillar, and facilitating the rapid integration of other systems and nuances to stay ahead and aligned with your objectives and aims for a futuristic organization.

Best wishes,

RDS Yadav
Labour Law Adviser and Director,
Future Institute of Engineering and Management Technology
Email: [Email Removed For Privacy Reasons]

CTC Breakdown Without PF Deduction

As your company is not deducting PF, the salary will be divided into the following parts:

CTC Breakup: Annual Fixed Compensation

- Basic: 30-50% of fixed CTC
- HRA: 40-50% of basic (depending on location)
- Conveyance
- Education
- Project Allowance
- Medical
- Food Allowance

A. Total Fixed Components

Variable Compensation

- Performance Allowance, if any

B. Total Variable Component

CTC (A+B)

You can keep the other components (apart from basic and HRA) proportionally. For example, suppose a person is joining and offered a CTC of 6,00,000 where 5,50,000 is fixed, and 50,000 is variable.

Example CTC Breakup: Annual Fixed Compensation

- Basic: 2,75,000 (kept as 50%)
- HRA: 1,10,000 (40% of basic)
- Conveyance: 86,600
- Education: 30,000
- Project Allowance: 25,000
- Medical: 13,000
- Food Allowance: 10,400

A. Total Fixed Components: 5,50,000

Variable Compensation

- Performance Allowance: 50,000

B. Total Variable Component: 50,000

CTC (A+B): 6,00,000

Hope this helps.

Thanks,
Ankita