Dear Team,
In my company, we are planning to revise the salary for the employees. How will it change in Basic, HRA, and other headings? For example, if the employee is currently receiving 15K as a CTC, the breakup will include Basic Salary, House Rent Allowance, Conveyance Allowance, Medical, Leave Travel Allowance, Education Allowance, Washing Allowance, Mobile Allowance, Statutory Bonus, Special Allowance, and Employer contributions to ESI and PF.
My question is, will there be changes in all the components or are there any restrictions on allowances such as medical and phone allowances? Kindly advise at your earliest convenience.
Thanks and regards,
kumarram
From India , Madras
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In my company, we are planning to revise the salary for the employees. How will it change in Basic, HRA, and other headings? For example, if the employee is currently receiving 15K as a CTC, the breakup will include Basic Salary, House Rent Allowance, Conveyance Allowance, Medical, Leave Travel Allowance, Education Allowance, Washing Allowance, Mobile Allowance, Statutory Bonus, Special Allowance, and Employer contributions to ESI and PF.
My question is, will there be changes in all the components or are there any restrictions on allowances such as medical and phone allowances? Kindly advise at your earliest convenience.
Thanks and regards,
kumarram
From India , Madras
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Please ensure your basic/da( special allowance) is meeting the requirement of minimum wages norms of your area. Rest as per your convenience.
From India, Pune
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470From India, Pune
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Dear Mr. Prashant, it was a pleasure to see your answer. I am from Chennai, so Tamil Nadu minimum wage norms will be applicable normally in the private sector, which means basic + DA only, right? In government roles, only DA will be calculated separately, and then Special Allowance is also fully taxable. Could you please clarify this for me?
Additionally, can we apply the same percentage to all the heads? For example, if it is 10%, will it be applied to all the components such as House Rent Allowance, Conveyance Allowance, Medical Allowance, Leave Travel Allowance, Education Allowance, Washing Allowance, Mobile Allowance, and Statutory Bonus?
As you mentioned, it is at our convenience, but I still have some doubts. Thank you for your assistance.
Thanks and regards
From India , Madras
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Additionally, can we apply the same percentage to all the heads? For example, if it is 10%, will it be applied to all the components such as House Rent Allowance, Conveyance Allowance, Medical Allowance, Leave Travel Allowance, Education Allowance, Washing Allowance, Mobile Allowance, and Statutory Bonus?
As you mentioned, it is at our convenience, but I still have some doubts. Thank you for your assistance.
Thanks and regards
From India , Madras
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Understanding Basic Plus DA and Minimum Wage
Basic plus DA is not meant to be equivalent to the minimum wage. Ensure that the gross salary is not less than the minimum wage as prescribed by your state government. You can revise the salary structure with the mutual consent of the concerned employees by complying with the provisions of Section 9A of the ID Act, 1947, if the employee is categorized as a workman.
Make sure all other components do not exceed the basic salary for the contributions of statutory deductions. Components such as medical reimbursement, HRA, conveyance, LTA, and education allowances are predominantly provided to offer tax benefits to employees and are not categorized as statutory components. Hence, you can allocate a certain percentage of these components without any issue.
Thanks & Regards,
V SHAKYA
HR & Labour, Corporate Laws Advisor
From India, Agra
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Basic plus DA is not meant to be equivalent to the minimum wage. Ensure that the gross salary is not less than the minimum wage as prescribed by your state government. You can revise the salary structure with the mutual consent of the concerned employees by complying with the provisions of Section 9A of the ID Act, 1947, if the employee is categorized as a workman.
Make sure all other components do not exceed the basic salary for the contributions of statutory deductions. Components such as medical reimbursement, HRA, conveyance, LTA, and education allowances are predominantly provided to offer tax benefits to employees and are not categorized as statutory components. Hence, you can allocate a certain percentage of these components without any issue.
Thanks & Regards,
V SHAKYA
HR & Labour, Corporate Laws Advisor
From India, Agra
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Dear Kumar, you have to make things clear first. Having said that, you need to have a clear idea of how to proceed. Since you are starting with a CTC revision as a whole, list out the components of CTC. Identify which are determined as a lump sum (a fixed amount) and which are directly based on the basic pay/salary in terms of percentage. Then, determine the overall percentage increase you are proposing and compare it side by side.
Bifurcation of CTC Components
First of all, you need to bifurcate your components into two categories: those payable in cash/cheque or bank credit (recurring monthly), which directly affect the take-home pay of employees, such as Basic, DA, HRA, Conveyance, incentive bonus, etc. Then, consider the other components that are not payable monthly (non-cash costs) but form part of CTC.
Non-Monthly Payable Components
There are components reimbursed on an actual incurred basis, like medical expenses, which may be recurring monthly or through medical insurance/LTA (allowance paid monthly or annually, or reimbursed once in a block of 2 or 4 years, subject to grade-wise slabs/limits as per your policy). Statutory bonus is an annual affair. Some components are due only after retirement/separation, such as EPF, Gratuity, and leave encashment. All these are part of CTC.
Revision Possibilities
As part of the revision, all or some of these components, either in quantum or percentage, can be revised according to your current thinking. If you ask whether all these components will change, the answer depends on your observations. The answer lies with you. If you share your existing structure, we can suggest improvements. A sample structure is attached to give you an idea (not accurately calculated & blanks, rates to be updated).
From India, Bangalore
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Bifurcation of CTC Components
First of all, you need to bifurcate your components into two categories: those payable in cash/cheque or bank credit (recurring monthly), which directly affect the take-home pay of employees, such as Basic, DA, HRA, Conveyance, incentive bonus, etc. Then, consider the other components that are not payable monthly (non-cash costs) but form part of CTC.
Non-Monthly Payable Components
There are components reimbursed on an actual incurred basis, like medical expenses, which may be recurring monthly or through medical insurance/LTA (allowance paid monthly or annually, or reimbursed once in a block of 2 or 4 years, subject to grade-wise slabs/limits as per your policy). Statutory bonus is an annual affair. Some components are due only after retirement/separation, such as EPF, Gratuity, and leave encashment. All these are part of CTC.
Revision Possibilities
As part of the revision, all or some of these components, either in quantum or percentage, can be revised according to your current thinking. If you ask whether all these components will change, the answer depends on your observations. The answer lies with you. If you share your existing structure, we can suggest improvements. A sample structure is attached to give you an idea (not accurately calculated & blanks, rates to be updated).
From India, Bangalore
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Salary & Compensation Guidelines.zip
Employee Salary file - India 2016 AB.xls