Salary Structure in the Private Sector: How Is It Really Designed?

What is the salary structure? How is it designed in the private industry?

Dear Friend,

You can use the following components for the salary structure:
1. Basic Salary
2. HRA
3. Conveyance
4. Special Allowance

Gross = 1 + 2 + 3 + 4

CTC = Gross + Employer's contribution towards PF (12% of Basic) + Employer's contribution towards ESI (4.75% of Gross) + Gratuity (4.17% of Basic).

However, you can add some more components or use different names for the components.

Regards,
Subhabrata Dasgupta

Hi!

There is a difference between the concepts 'salary structure' and 'salary component'. What you have presented is simply a model of what are the possible components of a salary, i.e. basic rate + benefits & allowances.

A Salary Structure refers to the organization's compensation design wherein all the jobs within the company are defined, rated, classified, graded, benchmarked, and given rates (minimum, median, maximum) that are considered to be equitable, competitive, affordable, and sustainable to the organization. A salary structure is normally designed by specialists like us within the frameworks of a Job Evaluation Program.

Best wishes.

Ed Llarena, Jr. Managing Partner Emilla Consulting

Hi, can anyone help me please?

I am busy with my Certified Financial Planning postgraduate diploma and struggle a lot with a question on how to structure a partner of a private company's remuneration in the form of salary and dividends in order to obtain the most effective taxable income.

Are there any rules regarding the maximum dividends as part of a salary package?

Should I take the company's after-tax profit into account when making any calculations?

On the SAICA website of chartered accountants, I found that the optimal mix of salary and dividend will be reached when the salary paid to the individual is taxed at a rate no higher than the rate at which it would have been taxed had it remained and been taxed in the company's hands. The company's effective tax rate is 34.55% (28% fixed tax rate and 10% STC).

Do I need to use the above calculation in order to structure his current salary of R35,000 per month and R10,000 per annum director's fee in the form of salary and dividends?

I don't know where to start with this question. Can anyone help, please!