Dear Seniors, Our company follows a salary structure with components like Basic, HRA, Conveyance, and Other Allowance forming the gross salary. PF, ESI, and Professional Tax are deducted as per rules, and this forms the employee's take-home.
Review of Salary Breakup
My management wants to review this salary breakup. I would like to know whether:
1) Is a salary break compulsory under the law? If so, can you provide the rule that states so?
2) Say I am paying an amount of Rs. 18,000/- to an employee. As per my current salary structure, this Rs. 18,000 becomes the CTC. 60% of CTC forms the basic, 40% of Basic forms the HRA, and the remaining is divided proportionately into conveyance, other allowance, and PF & ESIC deductions as per rules.
My question is, can I consider Rs. 18,000 without providing any breakup, and if the employee is eligible for PF & ESI, we are ready to pay this.
3) All I want to clarify is the purpose of a salary breakup other than exempting employees above PF ESIC limits from the same. Does any rule state that salary has to have a breakup?
4) What about PF & ESI rules? Is it mentioned anywhere that wages should necessarily be basic and gross, respectively? I mean, if the employee's salary is, say, Rs. 14,000/-, can I not pay both PF & ESIC on Rs. 14,000?
We are not in favor of violating any laws; we were just curious to know the exact rule that governs the various components of the salary structure.
Actually, I took three examples with different salary ranges and explained to my management that by considering the remuneration paid to an employee, say Rs. 18,000/-, as a fixed amount without any breakup, we are violating the law because in this case, we are deliberately placing the employee out of the purview of both PF & ESIC.
Suppose we take a salary of Rs. 14,000/- and pay both PF & ESIC on this amount; we end up paying a higher PF & ESIC as a breakup of the same into gross and basic would have resulted in a smaller amount being paid. With a staff strength of more than 270 employees, we will end up paying substantially in PF & ESIC.
However, my boss wants me to back up my answer with the laws and statutes. Please guide me with your inputs.
I know that a breakup of the salary structure is the norm in industries, but what if the breakup is not there?
Regards,
From India, Bharuch
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17Review of Salary Breakup
My management wants to review this salary breakup. I would like to know whether:
1) Is a salary break compulsory under the law? If so, can you provide the rule that states so?
2) Say I am paying an amount of Rs. 18,000/- to an employee. As per my current salary structure, this Rs. 18,000 becomes the CTC. 60% of CTC forms the basic, 40% of Basic forms the HRA, and the remaining is divided proportionately into conveyance, other allowance, and PF & ESIC deductions as per rules.
My question is, can I consider Rs. 18,000 without providing any breakup, and if the employee is eligible for PF & ESI, we are ready to pay this.
3) All I want to clarify is the purpose of a salary breakup other than exempting employees above PF ESIC limits from the same. Does any rule state that salary has to have a breakup?
4) What about PF & ESI rules? Is it mentioned anywhere that wages should necessarily be basic and gross, respectively? I mean, if the employee's salary is, say, Rs. 14,000/-, can I not pay both PF & ESIC on Rs. 14,000?
We are not in favor of violating any laws; we were just curious to know the exact rule that governs the various components of the salary structure.
Actually, I took three examples with different salary ranges and explained to my management that by considering the remuneration paid to an employee, say Rs. 18,000/-, as a fixed amount without any breakup, we are violating the law because in this case, we are deliberately placing the employee out of the purview of both PF & ESIC.
Suppose we take a salary of Rs. 14,000/- and pay both PF & ESIC on this amount; we end up paying a higher PF & ESIC as a breakup of the same into gross and basic would have resulted in a smaller amount being paid. With a staff strength of more than 270 employees, we will end up paying substantially in PF & ESIC.
However, my boss wants me to back up my answer with the laws and statutes. Please guide me with your inputs.
I know that a breakup of the salary structure is the norm in industries, but what if the breakup is not there?
Regards,
From India, Bharuch
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Salary Breakup with ESI.xls