Salary Breakdown Across Levels: What Are Your Thoughts on This?

Hi all,

Here, I am attaching the salary breakdown for all levels. Please provide your feedback.

Regards,
Seema

Hi,

Overall, it is very good. What you can do is add a Gratuity Provision of 4.8% in the Liabilities column and professional tax deduction in the deductions column.

Regards,
Phanikanth

Dear Sir,

I appreciate your post, but my PF people are telling me that we cannot accept it if you hide your salary in HRA by more than 15%. Can you comment on this?

Regards,

P.T. Rameshan

Hi,

Wonderful work and very helpful to new professionals. If you can add gratuity liability, FBT calculation, and calculation of PF on actuals, this would be a reference/guide sheet for HR professionals.

Prasoon

Hi Seema,

I have a doubt. Could you please tell me what the Balance variable means?

Priya Maran

Hi all,

Thank you all for your responses! The balance variable mentioned is akin to a security deposit or training expense deduction from the CTC. This amount is refundable every six months, following our company policy for all software development employees.

Seniors, could you please provide more insight on Gratuity and FBT? How can I calculate these? I would greatly appreciate it if anyone could shed light on Gratuity, FBT, and their calculations.

Regards,
Seema

Hi Seema,

Your salary breakup includes PF at Rs. 780 for all employees who are drawing a basic salary of more than 6500. According to PF rules, the employer's contribution is limited to Rs. 780, while the employee's contribution should be a minimum of 12% of their basic salary.

Please correct me if I am wrong.

Priya Maran

Hi Seema,

The effort that has gone into making this sheet is commendable. A few nips and tucks required here:

1) You have mentioned Basic @ 59.40% of Gross - In group A, the gross amount is Rs 8500/- while the basic amount is shown as Rs.4950/-. Please confirm how you have arrived at this figure. Similarly for other groups.

2) What is WF in the liabilities segment?

3) Is Dearness allowance considered alongside basic, and also what percentage of basic is calculated as dearness allowance? If so, how have you incorporated that into the basic amount?

4) PF is 12% of basic allotted to the employee - The cap of Rs.6500/- is not mandatory in the case of the employee and employer. Please correct me if I am wrong. In the event of superannuation and gratuity components being added: gratuity would be 4.81% of basic, and superannuation would be 15% of basic. Again, correct me if I am wrong.

Thanks,
Ann

Hi Seema,

This information is very useful for individuals seeking a basic understanding of salary breakdowns. However, the percentages may vary from one organization to another. Nonetheless, it will still provide a general idea of how salaries are structured.

Regards,
Manju :)

Hi Seema,

The effort that has gone into making this sheet is commendable. A few nips and tucks required here:

1) You have mentioned Basic @ 59.40% of Gross - In group A, the gross amount is Rs 8500/- while the basic amount is shown as Rs.4950/-. Please confirm how you have arrived at this figure. Similarly for other groups.

2) What is WF in the liabilities segment?

3) Is Dearness allowance considered alongside basic, and also what percentage of basic is calculated as dearness allowance? If so, how have you incorporated that into the basic amount?

4) PF is 12% of basic allotted to the employee - The cap of Rs.6500/- is not mandatory in the case of the employee and employer. Please correct me if I am wrong.

In the event of superannuation and gratuity components being added: gratuity would be 4.81% of basic and superannuation would be 15% of basic. Again, correct me if I am wrong.

Thanks,
Ann

Awaiting your reply.

Dear Seema,

Good effort.

However, please clarify the basic formula. The formula states 66% of the monthly gross, whereas the title indicates 59.40. If it is 59.40, I believe your company may be creating a significant liability. What is your company's policy on leave encashments? Just calculate the liability with the current basic structure (at 60%); it will result in a substantial bill. Ideally, it should be 31% of the total CTC.

Does conveyance incur an FBT? Please correct me if I am mistaken.

What does EA stand for?

Regarding "Bal variable," under what category are you recovering it, and is it legal? Please provide clarification.

Recovering a salary without the employee's consent is an offense; please verify this with your legal consultant.

Changes may be introduced, but they should not disadvantage the employee, whether in terms of a reduction in P.F. contribution or a decrease in their take-home pay.

FBT is calculated at 6.73% for medical reimbursements and 6.73% for car maintenance. There is no FBT on food allowances such as Sodexo or food coupons.

PT could be displayed.

Statutory bonus can be included in the CTC as it is a liability that needs to be paid at 8.33% or 3500.

Regards,

Ravindra

Thanks a lot for the break-up; it has been really helpful.

I still have a query for which the file does not provide me with an answer, which would be as follows:

Basic @ 59.40% of Gross: Rs.1,848.00
HRA @ 50% of basic: Rs.924.00
Conveyance: Rs.800.00
E.A: Rs.200.00
Others: Rs.28.00
Gross: Rs.3,800.00
Medical: Rs.-
Fuel Expenses: Rs.-
Entertainment: Rs.-
Reimbursements: Rs.-
Monthly Gross: Rs.3,800.00
P.F.: Rs.252.00
E.S.I.: Rs.180.50
WF: Rs.-
Ex-Gratia: Rs.-
Liabilities: Rs.432.50
CTC: Rs.4,232.50
P.F.: Rs.221.76
E.S.I.: Rs.66.50
bal. variable: Rs.184.80
Income Tax: Rs.-
Deductions: Rs.473.06
NET TAKE: Rs.3,326.94

Is this break-up as per the laws defined by the Minimum Wage Act?

Dear,

The following aspects are missing. Re-design the file, then it will be very useful:
1) Gratuity
2) Professional Tax
3) PF maximum limit

Regards,
Murali

Hi Seema,

Thank you very much. Could you please provide me with an overview of HR activities typically carried out in an organization? I am a fresher working in a private company in Chennai in the HR department. There are no senior individuals in my company to guide me. I would appreciate it if you could share the details with me.

Thanks in advance.

Regards,
Santhoshini

Dear Murali,

Can you please assist me with Gratuity and Profession Tax? I do not have information about that.

Regards,
Seema

Hi,

The salary structure differs from organization to organization; however, certain components may be fixed depending upon various taxation, PF, and other laws. We need to keep ourselves updated and prepare a tailor-made structure.

Also, the structure may be modified as and when required to ensure that employees and employers get maximum benefits while keeping statutory compliance in mind.

Anyhow, the present structure gives some basic idea. Thanks for sharing.

Dear HR Friends,

The salary break-up in different slabs is very informative and useful. I am facing one problem. Previously, we have recovered PF contributions for 60% of the basic pay in the gross salary. However, the PF authorities inspected our organization and instructed us to recover PF contributions for 85% of the basic pay in the gross salary. This change means that the management is contributing more to the corporation.

I want to know if there is any law stating to take 85% for PF in the gross salary. Additionally, we have not established any pay structure so far, and no settlement has been reached yet.

I request the seniors to clarify my doubt.

Alphonse 😂😂😂
GTE
5th year of completion of manufacturing.

Hi Seema,

It's magical. A wonderful creation. But could you please clarify why PF and ESI differ in the case of employer liability and employee deduction? It would be immensely useful to me.

Good day and God bless,
JayPee

Seema,

Good job!

Basic can be at a percentage decided by the management, for example, it could be at 50% or 60% too. Hence, we can change the formula in the cell. Also, please add a Tax deductions column during recruitment itself so that towards the end of the financial year, employees and employers can work without tension.

Regards,

Merlyne

Hi Seema,

Very informative for new HR professionals. Can you please guide me on how to calculate the PF, ESI, Ex gratia, and IT?

Regards,

Deep

Hi Seema! 😂

Thanks a million for your help. Could you assist me with determining the salary structure for a SME? The company is a 15+ Cr. Turnover Engineering organization with ISO9001:2000 certification. The management has requested me to provide the salary details for various job positions within our organization. This includes the starting salaries, increments, and pay revisions within a year.

I need to outline the pay scales for different levels of experience:
- Freshers
- 1 year
- 2 years
- 3 years
- 4 years
- 5 years
- 5 to 10 years
- 10 to 15 years
- 15 to 20 years of experience

Once I organize the positions, I will share the information in the forum. Your guidance on this matter would be greatly appreciated.

Best regards,
HRP

Hi,

60% of the gross should be allocated to the basic salary, while 40% of the basic should be designated as House Rent Allowance (HRA), depending on the classification of the city. The remaining amount can be divided into various categories such as all-purpose allowance, special allowance, retaining allowance, etc., for tax exemptions relating to reimbursements.

The following allocations are suggested for tax exceptions against reimbursements:

- Rs. 750 for books and periodicals
- Rs. 1,250 for medical allowances
- Rs. 5,000 for driver salary
- Rs. 1,500 for food allowances
- Approximately Rs. 4,000 for conveyance expenses
- Telephone/mobile bills
- Electricity/water bills

Please let me know if any further clarification is needed.

Hello Seema,

Nice working! One has to make small changes considering recent bonus implications up to Rs. 10,000.00 as per recent notifications. Do you have any gradation and salary scales with designations, etc.? I will be happy if I get some inputs.

Thank you,
Divyang

Hi Shobhini,

Here is the tax calculation. Hope this will help you.

Regards,
Seema

Hi,

What Phanikanth says is correct. Add Gratuity in Liabilities and Prof. Deduction in Deductions. Additionally, another item that can be included in deductions is for Insurance and Canteen.

PF is calculated from the basic salary at 12%. EPF is based on the basic salary of 6500, which amounts to Rs. 541 only for the Pension scheme.

Lavanya

Hi Seema,

I have gone through the breakup. It seems fine, but I wanted to know why you haven't added the reimbursed amount. You could have actually added it to the CTC and then shown it in the deductions.

Moreover, I wanted to know what percentage of employee and employer contributions towards ESIC you have taken.

Regards,
Babita Rajan

Hi Babita,

ESI is contributed from both sides by the employee as well as the employer. It is calculated based on the gross salary per month, with a maximum ceiling of 10,000 Rs. per month. The contribution from both sides is as follows:

Employee Side - 1.75% of gross per month. So, if the gross salary of an employee is 8,000 per month, the ESI contribution would be 8,000 * 1.75% = 140 Rupees.

Employer Side - 4.75% of gross per month. The ESI contribution would be 8,000 * 4.75% = 380 Rupees.

Regards,
Amit Seth.

Dear Seema,

Please insert a row for gratuity at 4.88%, and FBT rates are 6% on total reimbursement for the reimbursement heads you have selected. The company can even recover the FBT if it's a significant amount for the organization or may consider it as part of CTC.

Regards,
Prasoon

Can someone help me with the tax exemption limit, proportion of tax on books and periodicals, fuel reimbursement, uniform allowance, washing allowance, education and child tuition, telephone and mobile reimbursement when making an offer to a new candidate?

Regards