Is There a Legal Standard for Dividing Salary Components in C.T.C? Seeking Guidance

Dear seniors,

Is there a standard percentage fixed for salary heads bifurcations in C.T.C (i.e., Basic, H.R.A, Conveyance, Education Allowance, Medical Allowance, Other Allowance, etc.) in industrial laws? If anybody has this information, please share it with me ASAP.

From,
Deepak
Today's Writing Instruments Ltd.
Dadra, U.T. of Dadra & Nagar Haveli.

Hey all,

I have had the same query for a long time, but have never received a satisfactory reply. Can someone really help me with how to categorize salary under different heads? Or perhaps suggest some reading material on the same.

Best Regards,
Kavita

Dear Deepak & Kavita, there is no specific guideline in any law as of date to bifurcate CTC into different pockets. It requires an understanding of "Remuneration & Benefit Management" in detail. Let me try to explain the subject in my way. First of all, the term CTC is not mentioned in any labor laws. Still, it is an essential term used by the majority of organizations to control employee costs properly, and it varies from organization to organization. Let us understand the way we arrive at CTC.

Understanding CTC

First of all, there is monthly gross salary, which consists of Basic, DA, HRA, and many other allowances (CCA, Medical, CEA, etc.). Then annual components of remuneration, if any - Bonus, LTA, Furnishing, Yearly Incentive, Club Membership, Co's Car, etc., at different levels of employees within the organization. Then comes Statutory costs - employer's contribution to PF, ESI; Gratuity, and there are organizations that also provide facilities for higher-level employees such as extra legal - Pension (mostly with LIC). If we add all the above, we will arrive at CTC. There are organizations that consider yearly leave encashment, canteen subsidy also as a part of CTC.

Specific % of Different Components

Now both of you are interested in knowing the specific % of different components. In my opinion, it may be different for different categories of employees within the organization.

For the Lowest Category

Take care of Minimum wages first.

For Monthly Gross Salary up to 30,000/-

Basic may be 50% of monthly gross (usually suggested by the PF inspectors).

Above 15,000/- Basic per Month

Basic may taper off, i.e., the higher the monthly gross, the % of Basic may vary between <50% to >= 30%, depending on the number of different categories of employees within the organization.

Higher Monthly Gross and CTC

The more income tax-friendly pocket should be in the structure (LTA, Medical, Conveyance, CEA, etc.).

Developing the Remuneration Policy

For developing the Remuneration policy of any organization, one must keep in mind many things - Minimum wage, PF, ESI, Bonus, Gratuity, Income Tax, the level of the employee, etc., very carefully.

I trust this may provide you with some support in understanding the subject.

Thanks & Regards,

S. K. Bandyopadhyay, West Bengal

USD HR Solutions,

[Email Removed For Privacy Reasons]