How can we breakup the salary structure, what is the process and why we break it up?
From India, Delhi
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2From India, Delhi
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Hi Lavanya, salary breakup is a very essential element in salary management. The reason behind this is that through this, individuals can understand the basic components of their monthly salary or remuneration. This is also necessary for tax determination on the salary.
Your second question pertains to the process for the same. For that, you have to specify the position you are inquiring about.
Looking forward to your reply.
Regards,
Lavanya Dubey
From India, Mumbai
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Your second question pertains to the process for the same. For that, you have to specify the position you are inquiring about.
Looking forward to your reply.
Regards,
Lavanya Dubey
From India, Mumbai
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Hello Lavanya, I am forwarding the salary structure format, please find the attachment. You just put your CTC in yellow column, You will get your salary structure. Thanks & Regards, Monali
From India, Pune
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From India, Pune
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Dear Lavanya,
In order to answer your query, you need to mention your company policies, as policies differ from company to company. To my knowledge, for fixing a salary, there is no hard-and-fast rule; it is determined according to company policy.
In general practice, a company will not give any consolidated payment to its regular staff. Sometimes companies pay a consolidated amount to certain categories. For example, if they hire a person on a temporary basis or if somebody is in a probationary period until they get regularized in their service, they may offer a consolidated amount. In such cases, companies may pay in a consolidated amount.
If a company appoints a person on a consultancy basis, they will not break up his or her salary but merely pay a consolidated amount and deduct Income Tax (TDS) as per income tax norms.
Understanding Salary Breakup
Coming to your main query, to my knowledge and in general practice, giving a breakup depends on company policies. The main objective is to break up the salary to fulfill statutory obligations like P.F, Gratuity, P.T, ESI, income tax, etc., while simultaneously benefiting employees.
For example, if a company wants to fix Rs. 30,000/- as a salary for a person, they will bifurcate this amount into various components such as Basic, HRA, Conveyance, Medical Allowance, Special Allowance, LTA, Children Education Allowance, etc.
This bifurcation helps in determining their P.F, ESI, P.T, and Income Tax as per statutory norms.
Further, I am giving a small example for better understanding.
If the salary is Rs. 30,000/-:
- Basic: 50% of Salary, Rs. 15,000/- (Basic is determined according to company policy and varies from company to company)
- HRA: 40% on Basic (50% in metropolitan cities)
- Conveyance: Rs. 800/- (fixed, maximum allowed as per IT norms; in case of handicapped, Rs. 1600/- P.M)
- Medical Allowance: Rs. 1250/- P.M (fixed, maximum allowed as per IT norms against submission of bills)
- Children Education Allowance: Rs. 100/- P.M for one kid (maximum two kids, maximum allowed as per IT norms)
- LTA: Provided for tax saving, can be availed two times in a block of four years against submission of original bills
- Balance amount transferred to special allowance, which is fully taxable.
When fixing the Basic salary, a company has to consider all statutory obligations as most compliances are based on Basic salary like P.F, Gratuity, HRA, etc.
I hope you get some idea from the aforementioned information. If you want more information, simply use the search button at the top left. I am sure you will find adequate information in this regard.
I wish you all the best.
Regards,
TSK
From India, Hyderabad
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In order to answer your query, you need to mention your company policies, as policies differ from company to company. To my knowledge, for fixing a salary, there is no hard-and-fast rule; it is determined according to company policy.
In general practice, a company will not give any consolidated payment to its regular staff. Sometimes companies pay a consolidated amount to certain categories. For example, if they hire a person on a temporary basis or if somebody is in a probationary period until they get regularized in their service, they may offer a consolidated amount. In such cases, companies may pay in a consolidated amount.
If a company appoints a person on a consultancy basis, they will not break up his or her salary but merely pay a consolidated amount and deduct Income Tax (TDS) as per income tax norms.
Understanding Salary Breakup
Coming to your main query, to my knowledge and in general practice, giving a breakup depends on company policies. The main objective is to break up the salary to fulfill statutory obligations like P.F, Gratuity, P.T, ESI, income tax, etc., while simultaneously benefiting employees.
For example, if a company wants to fix Rs. 30,000/- as a salary for a person, they will bifurcate this amount into various components such as Basic, HRA, Conveyance, Medical Allowance, Special Allowance, LTA, Children Education Allowance, etc.
This bifurcation helps in determining their P.F, ESI, P.T, and Income Tax as per statutory norms.
Further, I am giving a small example for better understanding.
If the salary is Rs. 30,000/-:
- Basic: 50% of Salary, Rs. 15,000/- (Basic is determined according to company policy and varies from company to company)
- HRA: 40% on Basic (50% in metropolitan cities)
- Conveyance: Rs. 800/- (fixed, maximum allowed as per IT norms; in case of handicapped, Rs. 1600/- P.M)
- Medical Allowance: Rs. 1250/- P.M (fixed, maximum allowed as per IT norms against submission of bills)
- Children Education Allowance: Rs. 100/- P.M for one kid (maximum two kids, maximum allowed as per IT norms)
- LTA: Provided for tax saving, can be availed two times in a block of four years against submission of original bills
- Balance amount transferred to special allowance, which is fully taxable.
When fixing the Basic salary, a company has to consider all statutory obligations as most compliances are based on Basic salary like P.F, Gratuity, HRA, etc.
I hope you get some idea from the aforementioned information. If you want more information, simply use the search button at the top left. I am sure you will find adequate information in this regard.
I wish you all the best.
Regards,
TSK
From India, Hyderabad
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Thank you for your informative response. I have one more question - why do we break down the salary? Why can't we provide the salary without breaking it down? Additionally, how do we calculate the basic salary in CTC? I am currently working in recruitment and am interested in transitioning into the payroll department. What specific knowledge should I acquire for this transition?
I look forward to your reply.
Regards,
Lavanya
From India, Delhi
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I look forward to your reply.
Regards,
Lavanya
From India, Delhi
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Dear Lavanya, I have already explained to you why the salary has to be broken up into various parts. As we all work in professional organizations, we cannot make the payment as a lump sum amount without any breakups. To comply with statutory obligations, we need to bifurcate the payment into various parts.
For determining the basic salary, as I mentioned in my earlier post, there is no hard and fast rule; it is merely fixed as per company policies. These policies vary from company to company. In general practice, companies fix 40% to 50% as basic out of an employee's total salary. As you want to move to the payroll department, my suggestion is to go through your company policies and see what parameters they consider while fixing the basic salary. They might have issued appointment letters to employees who are already working as regular staff; refer to all those appointment copies. Ask your queries to seniors about the same, and I hope you will get appropriate information.
To my knowledge, you need to know all statutory compliances pertaining to employee benefits and compensations as per various acts (like P.F, ESI, Minimum Wages, Gratuity Act, etc., and many more).
Lastly, just use the search button; there are many similar kinds of questions that were raised earlier in this forum. Our seniors and experts have given their views and appropriate answers. Just do the same at your convenience, and you will get a bunch of information. Read more articles about the recruitment process and HR-related stuff either from this site or Google, and I am sure you will gain more knowledge.
I wish you all the best.
Regards
From India, Hyderabad
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For determining the basic salary, as I mentioned in my earlier post, there is no hard and fast rule; it is merely fixed as per company policies. These policies vary from company to company. In general practice, companies fix 40% to 50% as basic out of an employee's total salary. As you want to move to the payroll department, my suggestion is to go through your company policies and see what parameters they consider while fixing the basic salary. They might have issued appointment letters to employees who are already working as regular staff; refer to all those appointment copies. Ask your queries to seniors about the same, and I hope you will get appropriate information.
To my knowledge, you need to know all statutory compliances pertaining to employee benefits and compensations as per various acts (like P.F, ESI, Minimum Wages, Gratuity Act, etc., and many more).
Lastly, just use the search button; there are many similar kinds of questions that were raised earlier in this forum. Our seniors and experts have given their views and appropriate answers. Just do the same at your convenience, and you will get a bunch of information. Read more articles about the recruitment process and HR-related stuff either from this site or Google, and I am sure you will gain more knowledge.
I wish you all the best.
Regards
From India, Hyderabad
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Consolidated Pay and Gratuity Applicability
This is with reference to the Consolidated Pay. I am working in an organization where the salary is paid as consolidated only, without any breakup. For example, a Professor is being paid a consolidated pay of Rs. 60,000/- per month without any breakup, and Professional Tax & IT is deducted. My doubt is whether Gratuity is applicable on such a consolidated pay, and if so, how it is calculated. Kindly mail me urgently.
Thanks with regards,
JAVEED AKBER
From India, Hyderabad
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This is with reference to the Consolidated Pay. I am working in an organization where the salary is paid as consolidated only, without any breakup. For example, a Professor is being paid a consolidated pay of Rs. 60,000/- per month without any breakup, and Professional Tax & IT is deducted. My doubt is whether Gratuity is applicable on such a consolidated pay, and if so, how it is calculated. Kindly mail me urgently.
Thanks with regards,
JAVEED AKBER
From India, Hyderabad
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Salary breakup format.xls
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