Dear Cite HR family,
I hope you have a great weekend,
I wnat to know that what are the salary components manditory to include in CTC structure.
My company is registered under "shop and establishment" under the Telangana government.
What is the percentage that would be fine for basic, HRA, and any other components?
If you have any CTC structure as per the Shop and Establishment Act, Telangana government, please share it with me at: kpn.rathod87@gmail.com.
Thank you in advance.
From India, Pune
I hope you have a great weekend,
I wnat to know that what are the salary components manditory to include in CTC structure.
My company is registered under "shop and establishment" under the Telangana government.
What is the percentage that would be fine for basic, HRA, and any other components?
If you have any CTC structure as per the Shop and Establishment Act, Telangana government, please share it with me at: kpn.rathod87@gmail.com.
Thank you in advance.
From India, Pune
It is always fine if you fix the basic and VDA as per the minimum wages notification and then bifurcate the amounts paid in addition to the statutory pay into components that you like like HRA, Conveyance and other allowances. This will be safe way of salary fixation from the legal point of view.
From India, Kannur
4240From India, Kannur
There is no Act in India which has explained the CTC structure of any employee or organization as a whole. It is absolutely Organization's prerogative keeping in mind compliance of Minimum wages, PF, ESIC etc. Only in the new wage codes it has been mentioned that Basic or Basic & DA should be 50% of all payable amount as guided in the definition of Wages in all 4 codes.
Therefore, based on your organization's remuneration policy etc. structure CTC considering all spendings for the employee as close as possible.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
Therefore, based on your organization's remuneration policy etc. structure CTC considering all spendings for the employee as close as possible.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
The definition of wages under the new Labour Codes (proposed) is very funny. When the earlier Acts have defined the wages as total emoluments (though there are different interpretations by learned HR professionals in this regard so as to make it just the basic salary that they decide) the revised codes have defined wages to include 50% of allowances which exceeds basic and Dearness allowances also. This 50% invariably includes statutory bonus, value of house accommodation and amenities provided, house rent allowance, contribution to PF (with interest?), conveyance or travelling allowance including LTA, special allowance payable to a particular employee considering the skills to be put in for performing the work, amount payable as per a settlement or award (!!), overtime allowance (!) and commission. If a worker does overtime and thereby earns overtime wages, or a sales executive gets commission, that will be counted as allowances and if the sum of that allowance exceeds 50% of the total remuneration (again total remuneration) then the amount which exceeds that 50% will become basic wages. Interestingly, the contributions payable to PF is also an allowance under the labour Code.
The earlier Acts have made it very clear that the wages means amount as per agreements. Now the one in the Codes is confusing and meaningless. This is my opinion and I had similar posts and discussions about the definition of wages in other forums also but the advocates of new labour codes including one of the Officers of the Central Labour Department with a very commanding rank has not given a proper answer to it.
From India, Kannur
The earlier Acts have made it very clear that the wages means amount as per agreements. Now the one in the Codes is confusing and meaningless. This is my opinion and I had similar posts and discussions about the definition of wages in other forums also but the advocates of new labour codes including one of the Officers of the Central Labour Department with a very commanding rank has not given a proper answer to it.
From India, Kannur
After independence this is first time under all labor codes the definition of "Wages" uniformly and scientifically defined.
In the first part of the definition it is mentioned that Wages will be consisting of all items payable including Basic, DA and RA.
In the 2nd part there is a big exclusion list (a) to (k) mostly payable except value of house accommodation, electricity, water supply etc.
In the 1st proviso it is clearly mentioned that if the total exclusion under clause (a) to (i) is more than 50% of the total remuneration calculated under definition of Wages , the extra amount above 50% will be add back to Basic & DA.
Therefore, as per new wage code it is essential to find out judiciously the payable amount to any employee including exception and 50% of the same will be Basic & DA.
Law makers are not fool and they have very intelligently defined wages. One has to understand it with right spirit.
I have explained this several times to my earlier posts.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
In the first part of the definition it is mentioned that Wages will be consisting of all items payable including Basic, DA and RA.
In the 2nd part there is a big exclusion list (a) to (k) mostly payable except value of house accommodation, electricity, water supply etc.
In the 1st proviso it is clearly mentioned that if the total exclusion under clause (a) to (i) is more than 50% of the total remuneration calculated under definition of Wages , the extra amount above 50% will be add back to Basic & DA.
Therefore, as per new wage code it is essential to find out judiciously the payable amount to any employee including exception and 50% of the same will be Basic & DA.
Law makers are not fool and they have very intelligently defined wages. One has to understand it with right spirit.
I have explained this several times to my earlier posts.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
Dear Sir, Can you please explain wages with examples, like when the employee gets overtime wages, when the employer contributes to PF etc? The law makers are not fools, I know, but are FUNNY indeed to combine all these Acts in to four codes. Not even a single word of many Acts are not deleted or replaced but they have redefined wages, sure. But the same is very confusing. The Employees Compensation Act has a schedule of compensation. The same was introduced a centaury back. Only the ceiling of wages has changed but nothing has changed in the factor relating to age. What is the value addition to it?
Under the present laws, wages mean the total amount/ emolument/ as per contract of employment. It excludes certain allowances like HRA. But when HRA is paid to all employees, without considering the residential status of the employees, it will become part of wages. There are court interpretations in this directions. When we make an amendment to any Act, it should be the interpretations of the Courts which should be reflecting to it. Right from Roofs and Bridges case there are directions to treat allowances part of wages. It should have been considered when we redefine the wages in any new law. That has not happened but the same has been made more confusing. Why should there be 50% (or such other percentage as the Central Govt will fix) ? Make it straight that whatever is agreed is the wages.
We all engage workers like carpenters, plumbers or persons to do cleaning the premises to work in our house. They will demand, say, Rs 700 or Rs 1000 is my wages per day. The working time is 8 hours. If he is asked to work for another couple of hours to complete the work, he may ask for two hours extra and that will be based on Rs 700 or Rs 1000, as the case may be. If we say that out of Rs 700 your basic salary is only Rs 100 and you will get overtime pay based on that Rs 100 only, will he agree? He will says that his wages is Rs 700/ 1000 and he should get hourly rate on the basis of that. That is true also. Our system is wrong, I would say.
Under the new code, if you have more overtime wages, your basic pay will increase. When the calculations of ESI, EPF, Bonus have separate ceiling of Rs 21000, Rs 15000 and Rs 7000 or minimum wages whichever is higher respectively, why should we take this much strain to calculate wages? For deciding gratuity alone? If an employee who has done a lot of overtime in the last month will be eligible to get more gratuity because overtime wages will count to increase the basic wages as per the New code, if I am not wrong. Similarly, part of the statutory bonus will also form part of it.
I have done a calculation of wages under the New Codes with figures put against each. All these differ when PF, Bonus and Overtime wages change. We should first stop the system of private establishments splitting the total wages offered in to small components. In order to do that there should be one concept, that is, total salary as a unit concept. That is not served.
Dear Nanu Sir, please enlighten me with your views and how does it benefit the employees and the employers.
From India, Kannur
Under the present laws, wages mean the total amount/ emolument/ as per contract of employment. It excludes certain allowances like HRA. But when HRA is paid to all employees, without considering the residential status of the employees, it will become part of wages. There are court interpretations in this directions. When we make an amendment to any Act, it should be the interpretations of the Courts which should be reflecting to it. Right from Roofs and Bridges case there are directions to treat allowances part of wages. It should have been considered when we redefine the wages in any new law. That has not happened but the same has been made more confusing. Why should there be 50% (or such other percentage as the Central Govt will fix) ? Make it straight that whatever is agreed is the wages.
We all engage workers like carpenters, plumbers or persons to do cleaning the premises to work in our house. They will demand, say, Rs 700 or Rs 1000 is my wages per day. The working time is 8 hours. If he is asked to work for another couple of hours to complete the work, he may ask for two hours extra and that will be based on Rs 700 or Rs 1000, as the case may be. If we say that out of Rs 700 your basic salary is only Rs 100 and you will get overtime pay based on that Rs 100 only, will he agree? He will says that his wages is Rs 700/ 1000 and he should get hourly rate on the basis of that. That is true also. Our system is wrong, I would say.
Under the new code, if you have more overtime wages, your basic pay will increase. When the calculations of ESI, EPF, Bonus have separate ceiling of Rs 21000, Rs 15000 and Rs 7000 or minimum wages whichever is higher respectively, why should we take this much strain to calculate wages? For deciding gratuity alone? If an employee who has done a lot of overtime in the last month will be eligible to get more gratuity because overtime wages will count to increase the basic wages as per the New code, if I am not wrong. Similarly, part of the statutory bonus will also form part of it.
I have done a calculation of wages under the New Codes with figures put against each. All these differ when PF, Bonus and Overtime wages change. We should first stop the system of private establishments splitting the total wages offered in to small components. In order to do that there should be one concept, that is, total salary as a unit concept. That is not served.
Dear Nanu Sir, please enlighten me with your views and how does it benefit the employees and the employers.
From India, Kannur
Dear Mr. Madhu Sir,
I have explained the matter in my several earlier post with example. However, for your ready reference I am once again representing the same.
For example :- one employee is earning 8000/- as Basic , 2000/- as HRA & 10000/- as other Allowances, Total monthly gross - 20,000/-, PF contribution - 1800/- per month, Bonus Yearly - 12,000/- i.e per month 1000/- , LTA per annum 12,000/- i.e 1000/- per month, GPA & Group LIC Insurance premium per year - 3500/-. ESIC - 650/- PER MONTH.
Total Payable amount per month - 20,000/- + 1800/- +1000/- = 22800/- . Insurance premium and ESIC are not payable amount and not enjoyed by the employee regular basis rather utilize as and when required. It may be required throughout the year or may not be any time through out the year.
The basic salary of the employee will be 11,400/- and other items will be 11,400/- per month. The said employee has engaged for OT in the said month and earned 2000/- extra earning for the month. 55% of 2000 will add back to Basic and 45% will add back to Other side. 12% PF of 55% will be 6.7%. Therefore, basic will be 55% and others will be 45 + 6.7 = 51.7%. No deviation in 50 : 50 condition.
There are organizations where due to VDA formula monthly, quarterly, six monthly or yearly as per scheme VDA is changed and accordingly PF contribution is change. This is not a new concept. % bifurcation of OT and restructuring of the existing remuneration structure are the job of HR Professionals.
If we analyses the definition of wages as on date there are lot of varieties - BONUS AND GRATUITY ACT - Basic & DA. PF after apex court verdict it is on all allowances paid regular basis except HRA, OT,( as per definition of Basic wages which has not been amended till date ), Productivity related incentive etc. Under Factories Act it is ordinary rate of wages i.e monthly gross etc. etc.
Susanta Kumar Bandyopadhyay ( WB, Howrah)
CEO - USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
I have explained the matter in my several earlier post with example. However, for your ready reference I am once again representing the same.
For example :- one employee is earning 8000/- as Basic , 2000/- as HRA & 10000/- as other Allowances, Total monthly gross - 20,000/-, PF contribution - 1800/- per month, Bonus Yearly - 12,000/- i.e per month 1000/- , LTA per annum 12,000/- i.e 1000/- per month, GPA & Group LIC Insurance premium per year - 3500/-. ESIC - 650/- PER MONTH.
Total Payable amount per month - 20,000/- + 1800/- +1000/- = 22800/- . Insurance premium and ESIC are not payable amount and not enjoyed by the employee regular basis rather utilize as and when required. It may be required throughout the year or may not be any time through out the year.
The basic salary of the employee will be 11,400/- and other items will be 11,400/- per month. The said employee has engaged for OT in the said month and earned 2000/- extra earning for the month. 55% of 2000 will add back to Basic and 45% will add back to Other side. 12% PF of 55% will be 6.7%. Therefore, basic will be 55% and others will be 45 + 6.7 = 51.7%. No deviation in 50 : 50 condition.
There are organizations where due to VDA formula monthly, quarterly, six monthly or yearly as per scheme VDA is changed and accordingly PF contribution is change. This is not a new concept. % bifurcation of OT and restructuring of the existing remuneration structure are the job of HR Professionals.
If we analyses the definition of wages as on date there are lot of varieties - BONUS AND GRATUITY ACT - Basic & DA. PF after apex court verdict it is on all allowances paid regular basis except HRA, OT,( as per definition of Basic wages which has not been amended till date ), Productivity related incentive etc. Under Factories Act it is ordinary rate of wages i.e monthly gross etc. etc.
Susanta Kumar Bandyopadhyay ( WB, Howrah)
CEO - USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
My simple question is WHY THIS CONFUSIONS? Till the exclusion part of the definition of wages it is clear. The confusions come when the proviso about 50% comes. If the intension is to simplify the law and simplify the words and concepts used in the earlier Acts, they should have defined the wages in simple words that it is the total amount that an employee gets as part of the contract of employment. In the exclusion, of course, there can be PF contribution, ESI contributions, overtime wages, statutory Bonus and gratuity.
I can't understand why there be calculations to decide wages? It should be one and the same, ie, the total gross salary and nothing else.
Since the earlier Acts have excluded HRA from Wages, the new code also excluded it. But instead of blindly excluding what was required was to define HRA separately. HRA is an allowance given only to those employees who are required to stay in a rented residential building for business purpose. Then the employers will not pay it universally to all the employees. Now the tendency is that since HRA is in exclusion part, pay very huge amount as HRA keeping very small amount as basic pay. Only thing is that when there is any need for calculating basic pay (that happens only when there is gratuity payment because for all other payments like PF, ESI and Bonus, there are specific amounts decided as salary) a certain amount will be merged to basic pay. Why? What is the purpose served?
The most interesting thing is about inclusion of a certain percentage of overtime allowance to basic pay.
I don't agree with your comments that there are different amounts taken for different treatments. Though the wordings differ all the Acts have similar treatment. But we, the HRs have interpreted it differently. No where it is stated in the Payment of Gratuity Act that gratuity is payable on basic pay and DA alone but it is payable on total emoluments. It is an interpretations by people like us that gratuity is payable on basic and DA alone. For bonus, what the amended law pertaining to Bonus says is that it is payable on Rs 7000 or the minimum wages fixed whichever is higher. Under the code also the same thing has been reproduced. When we calculate bonus following the Code, should we take the wages (basic + DA) + 50% of allowances which exceeds the total.... for each month and then compare it with the minimum wages? Don't you think that when overtime becomes part of basic salary, it will not make the calculations more and more confusing? I do think that it is totally confusing.
Even before the Apex Court verdict about allowances to be included for PF contribution, the amount payable was on total wages only because the definition of basic wages is very clear and it is nothing but the total amount and not the basic wage that the private employers fix. The court has only given a clarification.
Now coming to your calculation, the wages qualifying to PF of the employee is Rs 18000. Assuming that EPF is capped on Rs 15000, the PF contribution is Rs 1800. Let us take the wages as Rs 14000 per month, with Rs 8000 as Basic wages, Rs 2000 as HRA and Rs 4000 as Other allowance. Then the PF will be contributed on Rs 14000. But when the allowances like overtime, PF (itself), HRA etc are taken again to decide the basic wages, this contribution will change, right?
When we have an enactment called Minimum Wages Act to ensure that every employee gets an assured amount as wages, the amount so notified could be made the basic wages across the industries. Whatever is paid over and above the notified minimum wages can be called 'allowances'. Regarding HRA, there should be some guidelines that it should be part of salary if paid to persons residing in his own house as that is followed in Income Tax. In the absence of such requirements, the employers will continue to bifurcate the salary as they wish, keeping the bare minimum in basic salary and putting the maximum in "other allowances'.
From India, Kannur
I can't understand why there be calculations to decide wages? It should be one and the same, ie, the total gross salary and nothing else.
Since the earlier Acts have excluded HRA from Wages, the new code also excluded it. But instead of blindly excluding what was required was to define HRA separately. HRA is an allowance given only to those employees who are required to stay in a rented residential building for business purpose. Then the employers will not pay it universally to all the employees. Now the tendency is that since HRA is in exclusion part, pay very huge amount as HRA keeping very small amount as basic pay. Only thing is that when there is any need for calculating basic pay (that happens only when there is gratuity payment because for all other payments like PF, ESI and Bonus, there are specific amounts decided as salary) a certain amount will be merged to basic pay. Why? What is the purpose served?
The most interesting thing is about inclusion of a certain percentage of overtime allowance to basic pay.
I don't agree with your comments that there are different amounts taken for different treatments. Though the wordings differ all the Acts have similar treatment. But we, the HRs have interpreted it differently. No where it is stated in the Payment of Gratuity Act that gratuity is payable on basic pay and DA alone but it is payable on total emoluments. It is an interpretations by people like us that gratuity is payable on basic and DA alone. For bonus, what the amended law pertaining to Bonus says is that it is payable on Rs 7000 or the minimum wages fixed whichever is higher. Under the code also the same thing has been reproduced. When we calculate bonus following the Code, should we take the wages (basic + DA) + 50% of allowances which exceeds the total.... for each month and then compare it with the minimum wages? Don't you think that when overtime becomes part of basic salary, it will not make the calculations more and more confusing? I do think that it is totally confusing.
Even before the Apex Court verdict about allowances to be included for PF contribution, the amount payable was on total wages only because the definition of basic wages is very clear and it is nothing but the total amount and not the basic wage that the private employers fix. The court has only given a clarification.
Now coming to your calculation, the wages qualifying to PF of the employee is Rs 18000. Assuming that EPF is capped on Rs 15000, the PF contribution is Rs 1800. Let us take the wages as Rs 14000 per month, with Rs 8000 as Basic wages, Rs 2000 as HRA and Rs 4000 as Other allowance. Then the PF will be contributed on Rs 14000. But when the allowances like overtime, PF (itself), HRA etc are taken again to decide the basic wages, this contribution will change, right?
When we have an enactment called Minimum Wages Act to ensure that every employee gets an assured amount as wages, the amount so notified could be made the basic wages across the industries. Whatever is paid over and above the notified minimum wages can be called 'allowances'. Regarding HRA, there should be some guidelines that it should be part of salary if paid to persons residing in his own house as that is followed in Income Tax. In the absence of such requirements, the employers will continue to bifurcate the salary as they wish, keeping the bare minimum in basic salary and putting the maximum in "other allowances'.
From India, Kannur
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
CTC SALARY SLIP FORM.xls