Hello HR professionals,
We are a USA manufacturer, starting a manufacturing unit in Gujarat, and we are not well-versed in certain salary practices. Our MD in India has advised that when we offer a gross annual salary to our employees in an appointment letter, we should break it down into several categories (Base Salary, Housing Allowance, Car Allowance, Vacation Allowance, Book Purchase, Medical Benefits, etc.). This is done, we are told, so that the employee faces fewer tax consequences.
Our USA president (me) is originally from India, as is our USA HR Manager, Archna Dhingra. However, we are not very knowledgeable (quite ignorant, in fact) in this matter.
Can someone educate us on the following:
1. If we hire a Production Supervisor, let's say, at a salary of Rs 20,000 per month, what categories should we break this salary into?
2. Are there any guidelines on what percentage to apply to each category? (e.g., 15% for Housing, etc.)
3. Can someone direct us to websites, articles, etc., on this subject?
4. We are going to provide housing to some key managers and cars to others. How should we apply the breakdown to them?
5. If we offer medical allowance or vacation allowance, do we need to ask for proof of expenses? Does this not encourage the submission of fake bills?
Thank you very much for your willingness to share your knowledge and wisdom.
-Rahul Shukla
President/CEO
S.S. White Technologies
Piscataway, NJ, USA
Website: www.sswhite.net
Email: Rahul.Shukla@sswhite.net
From United States, Hoboken
We are a USA manufacturer, starting a manufacturing unit in Gujarat, and we are not well-versed in certain salary practices. Our MD in India has advised that when we offer a gross annual salary to our employees in an appointment letter, we should break it down into several categories (Base Salary, Housing Allowance, Car Allowance, Vacation Allowance, Book Purchase, Medical Benefits, etc.). This is done, we are told, so that the employee faces fewer tax consequences.
Our USA president (me) is originally from India, as is our USA HR Manager, Archna Dhingra. However, we are not very knowledgeable (quite ignorant, in fact) in this matter.
Can someone educate us on the following:
1. If we hire a Production Supervisor, let's say, at a salary of Rs 20,000 per month, what categories should we break this salary into?
2. Are there any guidelines on what percentage to apply to each category? (e.g., 15% for Housing, etc.)
3. Can someone direct us to websites, articles, etc., on this subject?
4. We are going to provide housing to some key managers and cars to others. How should we apply the breakdown to them?
5. If we offer medical allowance or vacation allowance, do we need to ask for proof of expenses? Does this not encourage the submission of fake bills?
Thank you very much for your willingness to share your knowledge and wisdom.
-Rahul Shukla
President/CEO
S.S. White Technologies
Piscataway, NJ, USA
Website: www.sswhite.net
Email: Rahul.Shukla@sswhite.net
From United States, Hoboken
Hi Devendra,
Whenever we talk about "Reimbursements," it always implies that all the reimbursements should be in the name of the employee and not in the employer's name because the employer is providing these reimbursements to help the employee save on taxes. I hope this concept is now clear to you.
KATYANA
From India, Gurgaon
36Whenever we talk about "Reimbursements," it always implies that all the reimbursements should be in the name of the employee and not in the employer's name because the employer is providing these reimbursements to help the employee save on taxes. I hope this concept is now clear to you.
KATYANA
From India, Gurgaon
Hi,
Could you please elaborate on the terms mentioned in the salary calculation format, such as TA, FEP, MA, etc.? Additionally, could you confirm the percentage applied for each head?
Could you provide me with the salary calculation for the following amounts:
a) $15,000
b) $18,000
c) $50,000
d) $70,000 and $75,000
This information will help employees save and reduce their tax burden. Please guide me accordingly.
Regards,
From India, Mumbai
Could you please elaborate on the terms mentioned in the salary calculation format, such as TA, FEP, MA, etc.? Additionally, could you confirm the percentage applied for each head?
Could you provide me with the salary calculation for the following amounts:
a) $15,000
b) $18,000
c) $50,000
d) $70,000 and $75,000
This information will help employees save and reduce their tax burden. Please guide me accordingly.
Regards,
From India, Mumbai
Hello Friends,
After posting my questions on salary structure, I searched the archives and found answers to most of my questions. This is a great website, and many of you have selflessly posted articles, spreadsheets, etc. I wanted to send a thank-you email to some of you, but it seems I cannot yet until I make 5 postings.
So here is a general thanks to all of you great guys.
-Rahul Shukla SSWhite Technologies, USA
From United States, Hoboken
After posting my questions on salary structure, I searched the archives and found answers to most of my questions. This is a great website, and many of you have selflessly posted articles, spreadsheets, etc. I wanted to send a thank-you email to some of you, but it seems I cannot yet until I make 5 postings.
So here is a general thanks to all of you great guys.
-Rahul Shukla SSWhite Technologies, USA
From United States, Hoboken
The above-mentioned Salary Calculation is ENTIRELY WRONG.
No offense.
As per the above method, let us take an example of a person whose salary has been decided as $10,000.
Further, for complete clarification, let us assume he has taken a single leave each in the months of January (31 days), April (30 days), and February (28 days).
As per "gayathri.suraparaju" suggestion:
Per Day Salary in January: $10,000 / 31 = $322.58
Per Day Salary in February: $10,000 / 28 = $357.14
Per Day Salary in April: $10,000 / 30 = $333.33
Therefore, it means your Per Day Salary varies per month!
Hence, the person's salary (after deducting only leave) will be as follows:
Salary for January: $10,000 - $322.58 = $9677.42
Salary for February: $10,000 - $357.14 = $9642.86
Salary for April: $10,000 - $333.33 = $9666.67
Even though he has taken only a single day off, there will be a huge difference in salary in particular months.
HENCE, Correct Salary Calculation should be:
Monthly Salary = $10,000
Total Days in a Year: 365
Hence, Per Day Salary = $10,000 * 12 / 365 = $328.77 (Constant Value, Non-Variable)
Therefore, the person's salary for individual months IRRESPECTIVE OF CALENDAR DAYS will vary only if the person takes a leave. NOT OTHERWISE!
I hope the salary calculation will be a lot simpler now.
Alap Desai
No offense.
As per the above method, let us take an example of a person whose salary has been decided as $10,000.
Further, for complete clarification, let us assume he has taken a single leave each in the months of January (31 days), April (30 days), and February (28 days).
As per "gayathri.suraparaju" suggestion:
Per Day Salary in January: $10,000 / 31 = $322.58
Per Day Salary in February: $10,000 / 28 = $357.14
Per Day Salary in April: $10,000 / 30 = $333.33
Therefore, it means your Per Day Salary varies per month!
Hence, the person's salary (after deducting only leave) will be as follows:
Salary for January: $10,000 - $322.58 = $9677.42
Salary for February: $10,000 - $357.14 = $9642.86
Salary for April: $10,000 - $333.33 = $9666.67
Even though he has taken only a single day off, there will be a huge difference in salary in particular months.
HENCE, Correct Salary Calculation should be:
Monthly Salary = $10,000
Total Days in a Year: 365
Hence, Per Day Salary = $10,000 * 12 / 365 = $328.77 (Constant Value, Non-Variable)
Therefore, the person's salary for individual months IRRESPECTIVE OF CALENDAR DAYS will vary only if the person takes a leave. NOT OTHERWISE!
I hope the salary calculation will be a lot simpler now.
Alap Desai
Hi Katyana,
Your help has been invaluable. I am grateful for your assistance in this regard. My questions are as follows:
1. I won't be having a vehicle, so the driver, petrol, and vehicle reimbursements are not applicable.
2. In the changed circumstances, can I have a higher allowance for communication, books and periodicals, or entertainment?
3. I would be grateful if you could suggest a structure with the least tax outgo.
Annual Monthly Taxable
BASIC SALARY 264,000 22,000 264,000
HOUSE RENT ALLOWANCE (HRA) 158,400 13,200 132,000
TRANSPORT ALLOWANCE 9,600 800
SPECIAL ALLOWANCE 33,000 2,750 2,750
Total (A) 465,000 38,750 398,750
COMMUNICATION REIMBURSEMENT 36,000 3,000 -
LTA 22,000 -
MEDICAL REIMBURSEMENT 15,000 1,250 -
BOOKS & PERIODICALS 12,000 1,000 -
Total (B) 85,000 7,083 -
Annual CTC (A + B) 550,000 45,833 398,750
Is the above split adequate with reference to Income Tax outgo, or can it be improved?
Thanks and regards,
Jitendra
From India, Calcutta
Your help has been invaluable. I am grateful for your assistance in this regard. My questions are as follows:
1. I won't be having a vehicle, so the driver, petrol, and vehicle reimbursements are not applicable.
2. In the changed circumstances, can I have a higher allowance for communication, books and periodicals, or entertainment?
3. I would be grateful if you could suggest a structure with the least tax outgo.
Annual Monthly Taxable
BASIC SALARY 264,000 22,000 264,000
HOUSE RENT ALLOWANCE (HRA) 158,400 13,200 132,000
TRANSPORT ALLOWANCE 9,600 800
SPECIAL ALLOWANCE 33,000 2,750 2,750
Total (A) 465,000 38,750 398,750
COMMUNICATION REIMBURSEMENT 36,000 3,000 -
LTA 22,000 -
MEDICAL REIMBURSEMENT 15,000 1,250 -
BOOKS & PERIODICALS 12,000 1,000 -
Total (B) 85,000 7,083 -
Annual CTC (A + B) 550,000 45,833 398,750
Is the above split adequate with reference to Income Tax outgo, or can it be improved?
Thanks and regards,
Jitendra
From India, Calcutta
Hi Katyana, The above post is a bit jumbled up. I am attaching the excel file. Kindly go through it and make the any change that you feel will enhance the take home component. Thanks. Jitendra
From India, Calcutta
From India, Calcutta
Hi, Can I have a standard format of Salary Annexure with fixed and variable components? nayagam
From India, Madras
From India, Madras
Hi All, Would be grateful if you guys could suggest if the salary breakup is good. Can it be tweaked? What would be the income tax outgo ? Thanx JRC
From India, Calcutta
From India, Calcutta
Friends,
I have to develop the package structure in my company. What is the method followed for dividing the salary into various components? For example, if we fix a salary of 6 lakhs, what should be the Basic, HRA, and other allowances? Are there any legal terms we need to comply with? Also, please help me with LEAVE structures. How many CLs and PLs will be allowed, and are there any statutory laws to be followed? I am working for a US consulting company in Hyderabad.
Regards, TSRao
From India, Hyderabad
I have to develop the package structure in my company. What is the method followed for dividing the salary into various components? For example, if we fix a salary of 6 lakhs, what should be the Basic, HRA, and other allowances? Are there any legal terms we need to comply with? Also, please help me with LEAVE structures. How many CLs and PLs will be allowed, and are there any statutory laws to be followed? I am working for a US consulting company in Hyderabad.
Regards, TSRao
From India, Hyderabad
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SALARY SHEET CALCULATION.xls
Salary calculation.doc