New HR Here: Can You Help Me Understand Salary Structures and Allowances?

Dear Folks, I am the new HR of this company, and regarding the salary, I do have many doubts:

Salary Structure Queries

1. If a person is earning 26,000, how can their basic salary be 21,000?

2. If you are providing HRA, how can you also provide a Hostel Allowance?

3. Medical Allowance and Conveyance: How are these typically structured?

4. Education Allowance

To whom can we give the education allowance, and how much is appropriate?

5. If there is a Special Allowance to balance, why do we need to use a variable for variables?

6. Bonus and Paid Leave Deductions

Can bonuses and paid leave be deducted from the salary?

Please suggest and share some salary sheet examples.

Salary Components and Company Policy

1. I presume you mean to say Rs. 26,000 is the gross salary, which might include Basic Pay, HRA, and other allowances. No one can dictate that the basic pay should be Rs. 21,000. It’s your company's policy and discretion.

2. Hostel Allowance
What's this Hostel Allowance? It is normally applicable to interns or trainees who are generally paid a stipend or some consolidated salary. Paying HRA while providing Hostel Allowance is not likely. However, you should elaborate on the story behind these so that we can give our opinion.

3. Medical and Conveyance Allowance
Medical Allowance and Conveyance Allowance are also not compulsory components of one's emoluments. It depends on your company's policy. However, if your employees are covered under ESI, then the payment of Medical Allowance won’t arise. Similarly, the payment of Conveyance Allowance may not arise if:
i) The company provides conveyance, or
ii) The gross salary includes conveyance allowance but is not shown separately.
Some employers allow reimbursement of conveyance expenses either at fixed rates or at actuals for travel on business trips.

4. Education Allowance
Education Allowance is also not a compulsory component. Some employers break the total salary into various allowances, including Education Allowance, for employees with children (which may or may not be limited to two children) who are studying. There are no fixed rates under any law. Education Allowance is based on tuition fees, hostel fees for children staying in hostels, books, etc. It depends on the company's policy.

5. Special Allowance
The quantum of this salary component is not attached to any specific aspect but covers the balance of emoluments agreed upon as gross salary or CTC. Note that, as per the recent judgment of the Supreme Court, this part of the allowance, called 'Special Allowance,' should be included for the purpose of computing PF contribution. Therefore, you should be aware of this fact while determining the components of gross salary/CTC.

You have not attached any 'salary' sheet for our review. If you do that, we may suggest corrections if any. For your reference, models and explanations are attached, which are useful to you.

Dear Folks, can I split minimum wages into BASIC, HRA & BONUS? Minimum wages as the total gross, and 40% of the gross should be basic. Is it right, guys? I am asking this for security guards. If we provide quarters to them, can I put HRA in components?