How Do You Break Down a 20,000 Salary? Seeking Advice on Basic, HRA, and More

Hi, I am working in a manufacturing company. I just want to know if there are criteria for making a salary structure. If I want to offer a gross salary of 20,000/-, what is the percentage of basic, HRA, conveyance, LTA, and medical reimbursement?

Hi Rasika, as the gross salary is Rs. 20,000/-, could you please check if your company has to enable any ESI benefits for the employee under the ESI Act? Under ESI coverage, if the employee's monthly gross salary is Rs. 21,000/- or less, then mandatorily there would be employee (1% of gross) and employer ESI contributions (4%).

You need to check on PF coverage as well for the employee (calculated at 12% on basic and other allowances if the basic salary is less than Rs. 15,000/- per month) and employer contributions (8.33% (EPS) + 3.67% (EPF)). The basic can be at any %. However, the HRA for tax exemption calculations could be set at 40% of the basic salary if the employee works in a non-metro city and at 50% of the basic if the employee works in a metro city.

Regarding medical reimbursement, I believe you are referring to the medical allowance component to be added to the salary stack. The medical allowance and conveyance allowance would no longer be required, as there is now the standard deduction of Rs. 40,000/- per annum for tax exemption. If you are referring to medical reimbursement where you actually provide reimbursement based on medical bills provided by the employees, then you can add this to the CTC component.

For adding the LTA component, there is no fixed percentage for this. Hope these details provide a bit of an idea on the stack.

Hi Rasikaji, under the Minimum Wages Act, every state has scheduled employment and its minimum basic wage in various categories of skills and areas or zones. For fixing the basic minimum salary as per the schedule of employment notifications issued by the government from time to time, similarly, DA/Special allowances are also declared by the government. Thus, we can define the basic and DA of an employee. Then, as defined, various allowances are adjusted within the defined percentages and entitlements, etc. Further components of statutory compliance like EPF, ESI, PT, LWF, etc., are accounted for calculating the gross amount of salary.

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