Understanding Salary Breakup: How to Calculate Basic, HRA, and PF Deductions?

Hi Friends,

Can anyone tell me what the salary breakup is, what is the maximum and minimum percentage of basic on gross, and what percentage of HRA maximum and minimum on basic will be given in the salary breakup? Please help me out with this.

The reason I am asking is that based on the basic, PF deduction will be calculated, and HRA will be calculated on the basic.

I am looking forward to your help.

Thanks and Regards,
Sandeep

Hi Sandeep,

The basic salary will be 40-60% of the gross salary. Please find the attachment enclosed; it will be helpful for you.

Dhamotharan

Dear Sandeep,

An example:

In CTC, Salary Distribution can be:
(A) Basic Salary + HRA + DA
(B) Conveyance + Medical + Other / Special Allowance if any
(C) Employers' Contribution for PF (12% of Basic)
Employers' Contribution for ESIC (4.75% of Gross)
(D) Employees' Contribution for PF (12% of Basic)
Employees' Contribution for ESIC (1.75% of Gross)

Gross Salary = (A) + (B)
CTC = (A) + (B) + (C)
Net in Hand = (A) + (B) - (D)

Salary breakup as follows:
Basic - 30%
HRA - 30%
Conveyances - 25%
Medical - 10%
Other - 5%

You can change the elements and values according to your company policies. For more information on salary breakup, please click here:
- https://www.citehr.com/download-list...p&subm it=Go
- https://www.citehr.com/search_new.ph...;amp;submit=Go

Thanks and Regards,
Binu

Hi Sandeep,

The contents of the salary breakup are as follows; you can prepare it at your convenience. HRA would be 40 to 60% of the basic salary.

- Basic
- HRA
- TA
- Other Allowance
- Mobile Reimbursement per Month

Gross Per Month = Sum of all the above.
Gross Per Annum = 12 * Gross/Month
PF Contribution = 12% of Basic/Annum
ESI Contribution = 4.75% of Gross/Annum
Medical = The mediclaim facility provided to an employee who is not covered under ESI, as the maximum ceiling for ESI is 10,000/Month. Any amount exceeding this will be covered under Mediclaim or as per company policy.

EX-Gratia/Bonus = A fixed amount as a bonus
Annual Fixed Gross Cost = Gross/Annum + Ex-gratia
Annual Total Cost = AFGC + PF + ESIC
Annual total cost is also referred to as CTC.

I hope this information helps you prepare the required details on your end.

Regards,
Amit Seth.

Dear friends,

I would like to know the rules I need to follow for creating a payslip for my organization because some suggest that the Basic salary must be 60% of the gross salary and HRA should be 40 to 50% of the basic salary. I am seeking guidance on the specific act or book I should refer to for this information.

I am eagerly awaiting your response.

Thank you to all who are supporting me in this matter.

Thanks and regards,
Sandeep

Welcome. :D

Dear Sandeep,

There is no specific Act that mandates the basic salary to be 60% of the Gross; it varies, and the starting level is typically around 30%. The Basic salary is a significant component of the fixed part of the salary, and it is also taxable. In recent times, many companies are focusing more on the flexible part of the salary. Employees have the option to choose as per their preferences to save on taxes.

Regards,

Amit Seth

Hi Amit!

Thanks for the information. You're so knowledgeable and helpful.

Can you advise me on the following?

The employees who complete 6 months in an organization, it is compulsory to serve one month's notice if they want to resign.

In my organization, if an employee resigns, the organization requires the employee to serve a one-month notice period, and they can adjust their 10 days of unavail leave to serve the notice period.

When we disburse their last salary, we give them 20 days' salary, not the total 30 days' salary. This is a standard practice in my company.

Last month, one of our employees resigned; we gave her 20 days' salary and asked her to sign the full and final settlement letter.

She refused to sign the letter and wrote an email stating that:

"Since I had provided you with my resignation well in advance, I am entitled to receive the full salary for the notice period, including the notice days as per the LABOR POLICY. I was informed by your HR that they would release me 10 days early as I have that many P.L balance.

I will not sign the FNF settlement papers until I receive a reply to this email.

Please advise me on the same and help me out.

Regards,

Trupti :P"

Hi Trupti,

Thank you for such wonderful appreciation... 🙃

It is common practice to adjust one's available leave with the notice period, but this adjustment must be approved by the senior. However, we cannot compel anyone to take those leaves instead of serving out the complete notice period, even if the individual is willing to do so. This goes against the system. You can inform the employee about the number of leaves available in their account and suggest that they consider utilizing them to complete their notice period.

If your HR policy does not address this situation, it would be advisable to request the employee to complete their notice period and encash their leaves during the Full and Final settlement process.

Regards,

Amit Seth.

Hi Amit!

Thank you so much, you are so wonderful for solving my query! 😂 Also, I would like to know whether there is any labor law or policy stated by the employer regarding salary payments for resigning employees.

Regards, Trupti 😛

Hi Trupti,

You are always welcome! It is my pleasure to be able to help you. It is important to ensure that all accounts of resigned employees are cleared. Failure to do so may lead to questions during an audit.

Regards,
Amit Seth.

Corrected Text:

Hi Friends,

I'm working in electronic media as an HR Executive. Can anybody please provide the salary breakdown as per the Journalist Act for journalists and non-journalists? Or please recommend any websites for reference?

Thank you.

As far as salary breakup is concerned, the simplest breakdown of any gross salary can be as follows:
- Basic = 2/3 of gross
- House Rent = 40% of 2/3
- Utilities = Rest of all

For example, if the Gross amount is $10,000:
- Basic = $6,667
- House Rent = $2,667
- Utilities = $666

Athar Hashmi

Hi Amith,

Is it necessary to break the salary like 30% basic, 30% HRA, 25% conveyance, and the remaining as other allowances? In our company (IT), we are not doing it that way. In all the companies I have worked for, they break up the salary with low basic. This is because the PF deduction is based on the basic amount, right? Therefore, they provide a very low basic. In my current company, we do not deduct any PF or ESI because our total strength is not 20. However, we offer a nominal basic and the allowances are higher compared to the basic. If there is any rule, then we also have to follow it. Please let me know if there is a rule as mentioned above - 30%, 30%, 25%, and the balance.

Vasanthi

Yes, Vasanthi, you are very correct.

Most of the companies do keep their basic pay low, but the House Rent Allowance (HRA) is approximately 50% to help with taxes, and the allowances would be high. In reality, this results in a higher take-home salary.

Regards,

Amit Seth

Hi Amit,

I am working as an HR executive. I have never dealt with salary issues before. Now, I am looking for a change in my job. It is possible that in the new company, I may be asked about salary-related matters, such as how salaries were managed in my previous company, etc., as I am considering a shift to a more generic profile. Therefore, could you please provide me with some data, information, and other relevant details that would assist me in handling such tasks independently in the new company, without needing anyone else's assistance or guidance?

I am eagerly looking forward to your help and advice.

Anupriya Bhattacharya

Hi Anupriya,

It's really good that you are showing your interest in learning more in your professional field, and it's a good approach to achieve success. In salary structure preparation, you are required to be aware of basic contents like Basic, HRA, CCA, PF, ESI, and Medical Reimbursement. The rest of the components vary from company to company. Some companies pay educational allowances while some do not. Likewise, different components are adopted by different companies.

Therefore, having basic information about salary structure is essential for calculating monthly salaries and during full and final settlements. Please review the structure once again, and if you have any confusion, feel free to ask.

Regards,

Amit Seth.

Hi Sandeep,

Below, I have attached a detailed COMPENSATION RULES AND DESIGN GUIDELINES document. Please refer to it and let me know if you found it useful.

Thank you!

Regards, Sanghamitra

Hi Sandeep,

Here are some inputs for you:

- Basic: 50% of Gross
- HRA: 40% of Basic
- Conveyance: $800 Max
- Medical Reimbursement: $1250 Max
- Vehicle Maintenance: $12000 Max
- Personal Pay/Variable Pay: Remaining amounts
- Others include Company's contribution to PF, Gratuity (5%), Superannuation (15% of basic with a lock-in period) contribution, bonus/ex-gratia, etc.

Regards,
Aravind

Dear Sandeep,

Basic should be between 40 to 60% of the basic salary, and HRA will be fixed at 40 to 50% of the basic salary. Accordingly, other allowances are to be adjusted accordingly.

Regards,
L. Kumar

Hi,

Can you explain the bal.Variable 10% From Basic? I am confused about this.

With regards,

V. Sasikumar

Hi Amit,

Thank you for your appreciation. Can you help me out by explaining the basic structures of salary issues? Are there any specific topics in HR books or any recommended readings that could help in gaining a better understanding of this important subject?

Regards, Anupriya Bhattacharya

Hi Anupriya,

You are most welcome. If you go through my post, you will find a very simple salary structure that has been prepared there. Just arrange them in an Excel sheet and play with that using Excel formulas.

Prepare a variety of CTC structures as it will enhance your skills further.

Regards,

Amit Seth

Dear,

Salary breakup:
70% = basic + HRA + PF (Company contribution)
30% = other Allowance

or

60% - 40%

Regards,
Vibhor

Dear Amit, Sandeep,

I am yet to receive clarification on whether I need to break down the salary as you mentioned - basic 30%, HRA 40%, and the rest. Could you please clarify this for me? Is it a mandatory rule that I must adhere to, or is it flexible for me to allocate as per the benefit of both the company and the employee? Kindly provide me with this information at your earliest convenience.

Vasanthi

Hi Vasanthi,

It's not compulsory that you structure it like this. You may structure it in your own way, keeping in view the employees' benefits. For example, if the basic pay is low, then their PF contribution would also be low. Similarly, you can prepare so that the employees' take-home salary is handsome.

Regards,
Amit Seth

Hi Amit,

I want to ask you one question: to what extent should a person be computer literate to excel in the HR profession? How can knowledge of SAP-HR in today's scenario help an HR professional in establishing the best brand in the industry?

Looking forward to an insightful reply.

Regards,
Anupriya Bhattacharya :)

Hi, AnuPriya,

These days, computer literacy is an essential part of the HR profession. At least, you must have skills to work on MS-Office as well as the Internet.

- Every day, you have to make reports, and every report can't be made manually within a specified period of time.
- To impart training or to present something, you are required to prepare presentations.
- To prepare a database of employees, you are required to be proficient in Excel.
- To calculate rates
- To prepare salary structures
- MIS preparation

In short, everything in HR nowadays is computerized. To work systematically, you must be systematic, and your work style should be smart - smart in terms of accuracy, speed, and perfection.

Having knowledge of the SAP-HR module is an added advantage for an HR professional. Nowadays, many companies are implementing ERP to centralize their systems, and within ERP, one of the modules is HR. Having working knowledge of the HR module provides an extra advantage during recruitment.

By the way, what does it mean [Waiting for an intelligent reply.]... 🙄 🙄 🙄

Anyways, I hope this information will be useful for you.

Regards,

Amit Seth.

Hi,

I am Dhara, working as Sr. HR at IT Company. Right now we have not salary breck-up. i would like to introduce it. But I haven't too much legal knowledge of salary break-up. Please tell me appropriate book on it which will be guide me.

Dear All,

I still need some more clarifications on SALARY BREAKUP because in my org we currently have:

Basic - 50% of Gross CTC - 25% of basic Medical - 1250 Conveyance - 800 Misc - Rest amount

And our Account dept has proposed a new one, which is:

Basic - 60% of Gross HRA - 30% of Gross Medical - 5% of Gross Conveyance - 5% of Gross

I don't think this breakup is good. Please advice ASAP.

Kanchan (HR) :icon1: [Login to view]

Hi Gopi,

I am actually looking for a good salary break-up that can cater to the needs of both high and low-salary employees. What is the structure in your organization?

Regards,
Kanchan

Hi Amit, as you said Basic is, of course, taxable. However, HRA is calculated based on the Basic, right? This is not taxable (correct me if I am wrong).

Therefore, my questions are:

1. What would be the optimal way to allocate Basic? Additionally............

2. What is LTA? How is it calculated? I mean, what percentage of Basic can be allocated as LTA? Is it tax-deductible?

3. Does the PF contribution, which is (884.65 + 780 as per "proposed_breakup_157.xls"), fall within the taxable income?

Can anybody please answer those questions?

Thanks and regards,

What will be the final amount that I'll be getting in hand?

Components:

Fixed Per Annum (Rs.)
Basic 144,000
Choice Pay 337,796
Project Allowance *72,000
Performance Linked Incentive (PLI) **44,000
PF 17,280
Gratuity 6,924

* Project Allowance is paid only when posted at sites.
** Performance-linked incentive (PLI) is annually paid based on performance.

Assume that I'm posted at a site and getting 25,000 as PLI.

Thanks. It's really helpful. With this, I would like to ask one question. We have a 12% deduction for PF, out of which 8.33% is for the pension fund and only 3.67% is for PF. When we check the PF balance online, only a smaller part is sent as an SMS. So, how does the candidate get his pension fund part when he applies for the PF withdrawal?

Regards,
@ngel

Please find attached the salary breakup used in our company for your reference only.

Hi,

I would like to request guidance on preparing a salary structure for the employees in my company. Currently, we only have PT as a deduction.

Regards,
Raksha Koul

Hi Sandeep,

What will be the ideal salary structure according to the law, and what should be the minimum basic?

Thank you.

Hi, can anyone send me the salary breakup for Rs. 10,000/- as Basic Salary + Dearness Allowance + House Rent Allowance + Special Allowance. Please revert.

Regards,
Vijayan

Hello,

We need help with the salary breakup for Maharashtra location for 16k and 21k (CTC) per annum. Please suggest.