Dear Members,
I am starting the HR processes in a company. Currently, there is no salary structure, and employees receive a consolidated amount. I am seeking guidance on where to begin in structuring the salary process and which formalities/forms to utilize. Your assistance in this matter would be greatly appreciated.
Thanks,
Punita
From India, New Delhi
Acknowledge(0)
Amend(0)
1I am starting the HR processes in a company. Currently, there is no salary structure, and employees receive a consolidated amount. I am seeking guidance on where to begin in structuring the salary process and which formalities/forms to utilize. Your assistance in this matter would be greatly appreciated.
Thanks,
Punita
From India, New Delhi
Acknowledge(0)Amend(0)
If you want to create a salary structure, you are free to do so on whatever basis fits the circumstances. It is better to keep it simple.
HRA and Conveyance Allowances are tax beneficial, and therefore, you need to add them to your structure. For the rest, let it all stay in Basic unless you have a reason to create allowances, or in circumstances where allowances will be restricted to a specific group/type of employees.
From India, Mumbai
Acknowledge(0)Amend(0)
HRA and Conveyance Allowances are tax beneficial, and therefore, you need to add them to your structure. For the rest, let it all stay in Basic unless you have a reason to create allowances, or in circumstances where allowances will be restricted to a specific group/type of employees.
From India, Mumbai
Acknowledge(0)Amend(0)
Also, keep one thing in mind that you shouldn't do anything that may lead to labor unrest or disputes. The salaries being received by the employees have been in place for a long time, and any changes or amendments could affect their take-home pay, potentially leading to industrial disputes. Therefore, the first step is to create a roadmap and discuss it with other team members. This should be done smartly, and it's a good opportunity for you to enhance your skills.
From India, Rudarpur
Acknowledge(0)Amend(0)
From India, Rudarpur
Acknowledge(0)Amend(0)
While restructuring salaries of existing employees, utmost care needs to be taken to ensure that the take-home pay before and after restructuring must be nearly the same or higher. In such a case, there shall be no resentment amongst staff. After a draft restructuring, the staff must be taken into confidence by explaining to them the benefits they shall be getting post-restructuring of the salary proposed by you.
The CTC (Cost To The Company) salary structure may consist of:
1. Basic Pay - 50% of Total CTC (As per New wage Code)
2. HRA - 40% of Basic Pay in case of non-Metros and 50% of Basic Pay in case of Metros (Up to this amount, HRA (Leaving the first 10% of basic salary) is income tax-free if the employee stays in rented premises.
3. Conveyance Allowance - Rs. 1600/- per month or more depending upon the grade of the employee. Conveyance allowance up to Rs. 1600/- per month is exempt under the Income Tax Act.
4. Special Allowance - This will be the balancing figure.
5. Employer's Contribution towards Provident Fund Contribution - 12% of Basic Pay.
6. Employer's Contribution towards Employee's State Insurance Contribution - 3.75% of (1+2+4).
7. Gratuity Amount - 1/24 of Annual Basic Salary.
CTC shall be the sum total of points 1 to 7.
Modifications may be incorporated in the above depending upon industry/trade standards.
Jawaharlal Moondra
9829028028
jawaharlalmoondra@hotmail.com
From India, Jodhpur
Acknowledge(0)Amend(0)
The CTC (Cost To The Company) salary structure may consist of:
1. Basic Pay - 50% of Total CTC (As per New wage Code)
2. HRA - 40% of Basic Pay in case of non-Metros and 50% of Basic Pay in case of Metros (Up to this amount, HRA (Leaving the first 10% of basic salary) is income tax-free if the employee stays in rented premises.
3. Conveyance Allowance - Rs. 1600/- per month or more depending upon the grade of the employee. Conveyance allowance up to Rs. 1600/- per month is exempt under the Income Tax Act.
4. Special Allowance - This will be the balancing figure.
5. Employer's Contribution towards Provident Fund Contribution - 12% of Basic Pay.
6. Employer's Contribution towards Employee's State Insurance Contribution - 3.75% of (1+2+4).
7. Gratuity Amount - 1/24 of Annual Basic Salary.
CTC shall be the sum total of points 1 to 7.
Modifications may be incorporated in the above depending upon industry/trade standards.
Jawaharlal Moondra
9829028028
jawaharlalmoondra@hotmail.com
From India, Jodhpur
Acknowledge(0)Amend(0)
In the above pay structure as mentioned by Mr. Moondra, I have the following observations:
1. In the case of HRA, there are 3 tests - HRA paid minus 10% of Basic, 40% or 50% of basic for non-metro and metro respectively, and HRA is received by the employee - of the three, whichever is less is allowed as ITAX rebate.
2. So far my knowledge goes if ITAX rebate is taken under Conveyance and Dom. Medical, then Standard deduction will not be allowed. Request to check it.
3. Employer's contribution to PF is 13% of the monthly gross minus HRA subject to a maximum of 15,000/- per month if the employer thinks so. This is as per the Apex court verdict.
4. In the case of Gratuity, how you have arrived at 1/24 of the annual basic salary is a surprise to me. It is for a year 15/26 * Last drawn Basic and to determine per month, it can be divided by 12 again. So far I can understand you have done it by 15/30 = 1/2 and then as you have considered the annual basic, it is 1/24. This is not right.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531
www.usdhrs.inThis
From India, New Delhi
Acknowledge(0)Amend(0)
1. In the case of HRA, there are 3 tests - HRA paid minus 10% of Basic, 40% or 50% of basic for non-metro and metro respectively, and HRA is received by the employee - of the three, whichever is less is allowed as ITAX rebate.
2. So far my knowledge goes if ITAX rebate is taken under Conveyance and Dom. Medical, then Standard deduction will not be allowed. Request to check it.
3. Employer's contribution to PF is 13% of the monthly gross minus HRA subject to a maximum of 15,000/- per month if the employer thinks so. This is as per the Apex court verdict.
4. In the case of Gratuity, how you have arrived at 1/24 of the annual basic salary is a surprise to me. It is for a year 15/26 * Last drawn Basic and to determine per month, it can be divided by 12 again. So far I can understand you have done it by 15/30 = 1/2 and then as you have considered the annual basic, it is 1/24. This is not right.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531
From India, New Delhi
Acknowledge(0)Amend(0)
The following steps may have to be followed for designing a salary structure:
1. Ascertain the Organizational Structure.
2. Ensure that clear Designations are available for all staff, and each of them has a detailed Job Description.
3. Then bring all the Designations into different GRADES, which are called GRADATION.
4. Then develop SCALES OF PAY for each Grade.
5. Then fit the present Consolidated Salary into the respective Scale of pay, which is called FITMENT.
6. Issue office Orders for the new structure.
Regards
From India, Chennai
Acknowledge(0)Amend(0)
1. Ascertain the Organizational Structure.
2. Ensure that clear Designations are available for all staff, and each of them has a detailed Job Description.
3. Then bring all the Designations into different GRADES, which are called GRADATION.
4. Then develop SCALES OF PAY for each Grade.
5. Then fit the present Consolidated Salary into the respective Scale of pay, which is called FITMENT.
6. Issue office Orders for the new structure.
Regards
From India, Chennai
Acknowledge(0)Amend(0)
The undersigned has given just the broad guidelines and not the precise calculation applicable for each and every employee in an organization. The indicative details are based on a back-of-envelope calculation, and while designing a perfect structure, various other factors are also required to be taken into consideration.
In case of the HRA component, as already mentioned, it is tax-exempt only if the employee stays in rented premises. For others not staying in rented premises or paying less rent than the balance excess amount, it is taxable.
The conveyance allowance of Rs. 1600/- is exempt for all employees and is not covered under the standard deduction of Rs. 50,000/-. These amounts are the same for all, irrespective of the salary bracket under which an employee falls.
The employee is not concerned with the 1% admin charges required to be paid by the employer. The employer's share is just 12% of basic pay and has only been calculated for the CTC part. In order to retain skilled and trained employees, an organization may be required to pay PF contribution on the entire basic component of salary.
In case of gratuity, it is 15 days' salary per completed year of service. Therefore, what I have mentioned as 1/24 of annual basic salary is correct. 1/12 of annual salary equates to monthly salary, and 1/2 of that equates to 15 days' salary.
The salary shown per month is for 28/29/30/31 days but always inclusive of intervening weekly holidays. Therefore, the salary being paid is effectively for 30-4 = 26 days.
As the Gratuity is payable at the time of retirement of service or at the time of leaving the service in between provided the employee has completed 5 years of continuous service, and it is 15/26 of the basic component of the last pay drawn.
Jawaharlal Moondra 98290 28028
From India, Jodhpur
Acknowledge(0)Amend(0)
In case of the HRA component, as already mentioned, it is tax-exempt only if the employee stays in rented premises. For others not staying in rented premises or paying less rent than the balance excess amount, it is taxable.
The conveyance allowance of Rs. 1600/- is exempt for all employees and is not covered under the standard deduction of Rs. 50,000/-. These amounts are the same for all, irrespective of the salary bracket under which an employee falls.
The employee is not concerned with the 1% admin charges required to be paid by the employer. The employer's share is just 12% of basic pay and has only been calculated for the CTC part. In order to retain skilled and trained employees, an organization may be required to pay PF contribution on the entire basic component of salary.
In case of gratuity, it is 15 days' salary per completed year of service. Therefore, what I have mentioned as 1/24 of annual basic salary is correct. 1/12 of annual salary equates to monthly salary, and 1/2 of that equates to 15 days' salary.
The salary shown per month is for 28/29/30/31 days but always inclusive of intervening weekly holidays. Therefore, the salary being paid is effectively for 30-4 = 26 days.
As the Gratuity is payable at the time of retirement of service or at the time of leaving the service in between provided the employee has completed 5 years of continuous service, and it is 15/26 of the basic component of the last pay drawn.
Jawaharlal Moondra 98290 28028
From India, Jodhpur
Acknowledge(0)Amend(0)
Thanks, Mr. Moondra, for your clarification. I am not interested in elaborating again on the areas of confusion. As many young professionals are following the posts, let us be absolutely clear before posting anything, especially regarding the mathematical application part. There are instances where different replies may occur due to varying interpretations and thought processes. However, in any mathematical calculation, it always holds that 1 + 1 = 2 and never 3 or 4.
For example, in the case of gratuity calculation, you have mentioned that 1/2 is equivalent to 15 days' salary. As per the PG Act, regardless of the payment method, the per-day salary must be determined by dividing the monthly salary by 26, which is not equal to 1/2 of the monthly salary. The fraction 15/26 is not equivalent to 1/2; however, 15/30 is equivalent to 1/2, which does not comply with the PG Act.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in
From India, New Delhi
Acknowledge(0)Amend(0)
For example, in the case of gratuity calculation, you have mentioned that 1/2 is equivalent to 15 days' salary. As per the PG Act, regardless of the payment method, the per-day salary must be determined by dividing the monthly salary by 26, which is not equal to 1/2 of the monthly salary. The fraction 15/26 is not equivalent to 1/2; however, 15/30 is equivalent to 1/2, which does not comply with the PG Act.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in
From India, New Delhi
Acknowledge(0)Amend(0)Engage with peers to discuss and resolve work and business challenges collaboratively. Our AI-powered platform, features real-time fact-checking, peer reviews, and an extensive historical knowledge base. - Register and Log In.
How to start factory in pondicherry 1.doc
How.to.Stop.Wor rying.and.Start .Living,.Dale.C arnegie.pdf