Salary Structures: Can Companies Use Different Pay Models for Different Employees?

Is it compulsory to maintain the same salary structure for all employees of an organization? Can it differ from employee to employee (Basic + DA + HRA @ 40%, etc.)? Can we use multiple structures?

Uniformity in Salary Breakup

No, you cannot have multiple salary breakups. The salary breakup should be absolutely uniform irrespective of the designation or department in which employees work. Multiple salary breakups will have a different percentage of the basic salary. This difference will get reflected in the PF contribution as well. On what grounds will you justify the multiple salary breakups during the PF inspection?

Consistency and uniformity are the fundamental principles of law. Remove these fundamental principles, and you will find a rule of whims and fancies, manipulations, etc.

Thanks,
Dinesh Divekar

Dear Dinesh ji, I disagree with your answer. In my view, one can have a different salary structure for different categories of employees. In today's practice, many companies have entirely different and flexible structures for every employee. Employees are given the option to choose their own structure. The PF authority has nothing to do with the structure. The only thing to ensure is that the basic component is not less than the minimum wage rate, and HRA is payable as per the law, if applicable. Once the basic and gross are fixed, they cannot be reduced.

In the old days, there were cases of discrimination. But now, since employees choose the structure or accept the structure, there are no cases of discrimination.

No, you cannot have a different salary structure. The salary structure should be the same.

Regards,
R. Sudhakar

Dear Friend,

Why are you looking for a different salary structure for each employee? Are you trying to address tax exemptions or focus on perks provided to senior management? Please provide us with a brief explanation.

Regards,
Sapana

Dear Mr. Korgaonkar KA, I have spoken with my friend who works in EPFO. He has confirmed that an objection from a PF Enforcement Officer may arise if there is a variation in the percentage of the basic salary because the variation will impact the amount of PF contribution.

Suppose there are three employees, A, B, and C. Each has a gross salary of Rs 30,000/-. Suppose A has a basic salary of Rs 10,000/-, B has a basic salary of Rs 12,000/-, and C has a basic salary of Rs 15,000/-. Then the PF Enforcement Officer could object to the variation in the basic percentage.

Thanks,

Dinesh Divekar

Salary Structure Considerations

In my opinion, the topic has multiple dimensions. In today's scenario, for salary structure, there are issues like Minimum Wages, PF effects, Gratuity effects, Bonuses, ITAX-friendly pockets for higher salary employees, Flexible pay, Variable pay, etc. My personal views regarding a scientific salary structure are as follows:

1. It must protect the Minimum wages or more while paying the monthly gross salary.

2. PF authorities usually suggest 50% Basic/Basic & DA of the monthly gross up to 15k monthly Basic/Basic & DA. Beyond that, legally the authorities have nothing to say. Therefore, up to 30k monthly gross salary PF gross (Basic/Basic & DA) may be 50%. Beyond that, it may be less than that.

3. The more the Basic, the more the liability of Gratuity. Therefore, the Companies are controlling CTC considering all these factors.

4. There are ITAX-related pockets, e.g., HRA, Conveyance, Medical, LTA, etc., that should be considered for higher salary level employees.

5. Not necessarily the same salary structure and the same percentage for all categories of employees across the Organization.

6. Example of a Salary Structure

- Technician category monthly gross ranges from 15k to 30k, where basic is 50% of the monthly gross and 1600 conveyance allowance & rest is HRA.
- Supervisor category/Jr. Officer - monthly gross 35k to 50k and basic is 45% of the monthly gross, conveyance 1600/- per month, Medical allowance - 1250/month & rest is HRA. Yearly LTA pocket may be there considering the CTC effect.
- Asstt Manager/Manager Category - monthly gross 55k to 1 lac - basic is 40% of monthly gross, then conveyance and medical allowance as mentioned above and rest may be in HRA, CCA & LTA.
- Sr. Manager/GM and above - monthly gross 1.2 lac and above, basic is 35% of monthly gross, Conveyance, Medical, HRA, CCA, LTA, etc., rest plus may be some variable pay as an incentive (the formula may be based on business results & individual performance, etc.) to offer/meet certain CTC levels. There may be certain other perks e.g., Co's car, Club membership, etc.

7. Some Organizations nowadays are offering flexible pay where against certain CTC- monthly gross is fixed, basic is fixed, and certain items of the salary structure are offered to individuals for selection. Maybe some other innovative ways other organizations are thinking today.

8. Unionized Organizations have pay structure (basic structure) for different categories of Unionized employees along with other items but for the Management category usually determined by the organizations.

So, in my opinion, it is not a very simple task - needs detailed study and varies from organization to organization.

Thanks & Regards,

S K Bandyopadhyay, Kolkata

USD HR Solutions

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Hi,

Yes, it is compulsory to maintain the same salary structure for all employees.

Not clear as to whether the employer is a PSU or private and also the question was about workmen or Officers. In the private sector, they are free to maintain pay packets confidential. In PSUs, such differences may invite writ stating discrimination. For workmen in private or PSU, it may be based on settlements signed under the Industrial Disputes Act.

Absolutely, there is no legal impediment to having a multiple-component salary structure. The suggestions of EPO Inspectors only remain as suggestions and have no legal backing. In saying so, I'm not advocating, by any means, that there should be multiple components of a salary structure. Mostly, the differences would occur or may be necessary in allowances and non-recurring components like incentives, project/daily/tour/special/conveyance/medical/HRA allowances.

The Need for Multiple Components in Salary Structure

In a regime where CTC is the order of the day, there is a need for multiple components without adhering to a common/uniform structure. A common structure may be possible in Government/Quasi-Government establishments where the time scale is in vogue but not in private firms where the concept of 'time scale' is seldom used or applied. Similarly, even granting increments, usually once a year, is not strictly the rule in private firms as it is decided based on 'performance appraisal' systems. Likewise, HRA and other allowances are decided based on the status and importance of the incumbent, and hence a uniform percentage need not be followed.

Dear all,

Please help me because I have years of experience in the HR department, but I cannot prepare a salary sheet. Currently, I am working at Vectus Industries Limited. Whenever I join a new company's HR department, my boss is not clear. Initially, there is confusion regarding income tax salary deductions, the salary structure, and the percentage of deductions on components such as basic salary, HRA, DA, conveyance, medical allowances, and other benefits.

Thank you.