Understanding Salary Breakdowns: How Can I Calculate CTC from Basic Pay?

Hi there,

I am an HR professional. I like to learn about the salary break-up so that I can calculate the salary breakdown for any salary that is offered or the CTC from the basic, as I have never had hands-on experience with salaries. Can anyone please guide me?

Cheers,
Thank you in advance,
Nidhi (HR Executive) 😀

Hi Nidhi,

The contents of the salary breakup are as follows. You can prepare it as per 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 employees not covered under ESI, as the maximum ceiling for ESI is 10000/Month. Anything beyond this will be covered under Mediclaim or as per company policy.
- Ex-Gratia/Bonus = Fixed amount as Bonus
- Annual Fixed Gross Cost = Gross/Annum + Ex-gratia
- Annual Total Cost = AFGC + PF + ESIC
- Annual total cost is also known as CTC.

Hope this information helps you in preparing the required details at your end.

Regards,
Amit Seth

Hi Amit,

Thank you for the reply, but I would like to know more details as I do not have any idea for the same, starting from the basics. I do not even know how to calculate the basic salary, HRA, and other allowances for any salary range. If you could help me in this matter, that would be great.

Thanks in advance.

Cheers,
Nidhi (HR Executive)

Hi Nidhi,

Thanks.

See, the basic may vary in terms of percentage, but you may keep it for more than 30% of the gross salary. The House Rent Allowance (HRA) depends on the basic, so it may vary from 40 to 60% of the basic.

For example, if you are required to prepare a salary structure for rupees 12,000, then you may do it like this:

Basic - 5000/-
HRA - 50% of Basic = 2500/-
CCA - 800/-
Medical allowance - 1250/-
Other Allowance = 12000 - sum of the above (5000+2500+800+1250)
= 12000 - 9550 = 2450/-
Gross Salary = sum of the above = 5000+2500+800+1250+2450
So it will come to 12000/- per month.

Hope this example has helped you to understand the concept.

Regards,
Amit Seth.

Hi Amith,

How many days do we need to consider for preparing the salary, 30 days per month or 31 days?

Regards,
Anu

Hi Anu,

It depends on the month for which we are preparing the salary. If it is for January, then it will be calculated based on 31 days. Whereas for February, it shall be calculated for 28 or 29 days, accordingly.

Regards,

Amit Seth

Suppose, during the probationary period, my salary is 10,000/- per month, and if I take 7 days of leave, what would be the breakdown of my salary for the month? Please guide me.

Dear Nandini,

It depends on the type of your leave, whether it's paid leave or leave without pay. If it's paid leave, then you shall receive your complete salary for the month. But if it's leave without pay, then for the month of September, it shall be calculated as:

Salary payable = 10,000 / 30 * 23
= 7667/- Rupees.

Regards,

Amit Seth.

Dear Amit,

Thank you for the information. My maximum queries regarding the salary have been cleared due to your info. I have recently joined as an HR Executive in one organization. Could you please guide me on various HR policies that are frequently used in an organization? For example, leave policies for Permanent, Probationary, and Temporary Employees. Kindly revert to me. Thanks in advance.

Hello Nandini,

Most welcome, it's all my pleasure that it helped you.

See, Leave Policy varies from organization to organization. Mostly it follows the same structure:

Casual Leaves - 7, calculated on a pro-rata basis. Employees on probation shall also be eligible.

Sick Leaves - 7, same as casual leaves. The only difference is that they may be carried forward if remained unavailed.

Privilege Leaves: 20, employees shall be eligible to avail it only after confirmation. It can be carried forward, encashable, and calculated on a pro-rata basis.

Regards,
Amit Seth.

Hi, can anyone help me with a breakup for a CEO of a food specialties company? What could be the general components for a budget of about 50 lacs? Please revert.

Thanks,
Sidd

Dear Sidd,

It may be as follows:
Basic - 85000
HRA - 42500
CCA - 800
Child Ed. - 200
Special - 4000
Gross / PM - 132500/-
Gross / Ann. - 1590000/-

The second part would be reimbursement, which shall attract FBT @ 6.73%:
- Uniform & Washing - 20000/-
- Telephone - 8000/-
- Vehicle Hire Charges - 20000/-
- Petrol - 20000/-
- Business Promotions - 8000/-
- Books & Periodicals - 8000/-
Gross Per Month - 84000/-
Gross Per Annum - 1008000/-
Medical Reimbursement - 15000/-
Total A+B+C = 1590000 + 1008000 + 15000 = 2685000/-
Meal Coupons - 50000/-
Bonus - 100000/-
LTC - 72000/-
Driver Salary - 70000/-
Gratuity - 49000/-
Insurance - 15000/-
Furniture - 100000/-
CTC Per Annum shall come to 30,69000/-
The remaining 1.5 Lacs per month may be paid as Consultancy in favor of his/her spouse. TDS shall be applicable @10.3%
Hope this works out.

Regards,
Amit Seth.

I am an HR Recruiter. I want to know how to calculate the basic salary. Is it calculated from the monthly CTC or the total annual CTC? How much percentage are we calculating for Basic, HRA, Medical Allowance ($1250), and Conveyance ($800)? Please, can anyone guide me?

Warm regards,
Thank you,
Satheesh (HR Executive Resourcing)