Dear Community Members,
I am in need of your advice on formulating a salary breakdown in line with Tamilnadu norms. The components I need assistance with are as follows:
Basic Pay: 50%,
HRA: Yet to be determined,
Conveyance: 1250,
Special Allowance: 60%,
Other Allowance: 40%,
Gross Salary: Yet to be determined,
PF (Employer\'s Contribution): Yet to be determined,
PF (Employee\'s Contribution): Yet to be determined,
ESI (Employer\'s Contribution): Yet to be determined,
ESI (Employee\'s Contribution): Yet to be determined.
I am grateful for your assistance on this matter.
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I am in need of your advice on formulating a salary breakdown in line with Tamilnadu norms. The components I need assistance with are as follows:
Basic Pay: 50%,
HRA: Yet to be determined,
Conveyance: 1250,
Special Allowance: 60%,
Other Allowance: 40%,
Gross Salary: Yet to be determined,
PF (Employer\'s Contribution): Yet to be determined,
PF (Employee\'s Contribution): Yet to be determined,
ESI (Employer\'s Contribution): Yet to be determined,
ESI (Employee\'s Contribution): Yet to be determined.
I am grateful for your assistance on this matter.
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Structuring a salary breakdown in accordance with Tamilnadu norms involves several elements. Here's a step-by-step guide:
1. Basic Pay: This is usually 50% of the gross salary. It's the most significant part of the salary structure and forms the basis for other components.
2. House Rent Allowance (HRA): The HRA is typically 40-50% of the basic salary. However, it can vary based on the city of residence. In metro cities, it's usually 50% of the basic pay, while in non-metro cities, it's 40%.
3. Conveyance Allowance: You've mentioned this as 1250, which is within the standard range.
4. Special Allowance: This is often used to bridge the gap between the gross salary and the sum of other components. You've mentioned it as 60%, which seems high. It's usually a smaller percentage, but this can vary based on the company's policy.
5. Other Allowance: This is typically used for any other benefits provided by the company, like medical allowance, travel allowance, etc. You've mentioned it as 40%, which again seems high. It's usually a smaller percentage.
6. Gross Salary: This is the sum of all the above components.
7. PF (Employer's Contribution): As per the EPF Act, the employer contributes 12% of the basic pay towards the employee's PF.
8. PF (Employee's Contribution): The employee also contributes 12% of their basic pay towards the PF.
9. ESI (Employer's Contribution): The employer contributes 4.75% of the gross salary towards ESI.
10. ESI (Employee's Contribution): The employee contributes 1.75% of their gross salary towards ESI.
Please note that these are general guidelines and the actual percentages can vary based on the company's policy and the employee's contract. Always consult with a HR professional or legal advisor to ensure compliance with all relevant laws and regulations.
From India, Gurugram
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961. Basic Pay: This is usually 50% of the gross salary. It's the most significant part of the salary structure and forms the basis for other components.
2. House Rent Allowance (HRA): The HRA is typically 40-50% of the basic salary. However, it can vary based on the city of residence. In metro cities, it's usually 50% of the basic pay, while in non-metro cities, it's 40%.
3. Conveyance Allowance: You've mentioned this as 1250, which is within the standard range.
4. Special Allowance: This is often used to bridge the gap between the gross salary and the sum of other components. You've mentioned it as 60%, which seems high. It's usually a smaller percentage, but this can vary based on the company's policy.
5. Other Allowance: This is typically used for any other benefits provided by the company, like medical allowance, travel allowance, etc. You've mentioned it as 40%, which again seems high. It's usually a smaller percentage.
6. Gross Salary: This is the sum of all the above components.
7. PF (Employer's Contribution): As per the EPF Act, the employer contributes 12% of the basic pay towards the employee's PF.
8. PF (Employee's Contribution): The employee also contributes 12% of their basic pay towards the PF.
9. ESI (Employer's Contribution): The employer contributes 4.75% of the gross salary towards ESI.
10. ESI (Employee's Contribution): The employee contributes 1.75% of their gross salary towards ESI.
Please note that these are general guidelines and the actual percentages can vary based on the company's policy and the employee's contract. Always consult with a HR professional or legal advisor to ensure compliance with all relevant laws and regulations.
From India, Gurugram
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The basic thing that the establishment should consider while salary structuring is the minimum wages applicable to each type of job. There is no law which says that you should pay allowances other than Dearness Allowances. Therefore, allowances like house rent, education, conveyance etc are only compensatory allowances which are paid to compensate the respective expenses. Similarly, special allowance cannot be paid to all employees but it should be available to certain employees who put some special skill. Otherwise, this allowance will be clubbed to the basic pay for deciding contributions to PF, Bonus, Gratuity etc. Just by putting the basic salary at 50% of the total salary you will not gain anything but at the end of the day you will have to consider the entire salary as qualifying salary for gratuity and other statutory payments. At the same time, if the basic salary and dearness allowance are designed in such a way that the total of these two are not less than the statutory minimum wages fixed by the government you will be safe.
You should also understand that an employee is given increment for two reasons, viz, to reward his performance and to compensate the cost of living increase. The former should be done by increasing the basic pay and the latter should be reflected in the DA. When you do not have DA as a component of salary, where will you fit it? Naturally, you will give an increase in some allowance. Then that allowance will also be part of statutory salary, the salary on which you are expected to calculate bonus, PF, gratuity etc.
Therefore, you have to foresee certain things like liability towards gratuity while structuring the salary. It is not just percentages but it should have some legal backing.
From India, Kannur
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You should also understand that an employee is given increment for two reasons, viz, to reward his performance and to compensate the cost of living increase. The former should be done by increasing the basic pay and the latter should be reflected in the DA. When you do not have DA as a component of salary, where will you fit it? Naturally, you will give an increase in some allowance. Then that allowance will also be part of statutory salary, the salary on which you are expected to calculate bonus, PF, gratuity etc.
Therefore, you have to foresee certain things like liability towards gratuity while structuring the salary. It is not just percentages but it should have some legal backing.
From India, Kannur
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(Fact Checked)-Your explanation of salary structuring is accurate and insightful, especially the part about foreseeing liabilities like gratuity. Keep up the good work! (1 Acknowledge point)