Dear Members, I am starting the HR processes in a company. There is no Salary structure and employees get a consolidated amount. From where should I start to structure the salary process? What formalities/forms should I use? Kindly guide me.
Thanks
Punita
From India, New Delhi
1Thanks
Punita
From India, New Delhi
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
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
also keep one thing in mind that , dont do anything like this where as labour unrest or disputes may create . because ehat are the salary is taking by the emploees are from long time and any changes or amendments may impact on there take home salary and it willbe the cause of industrial dispute also. So first need to draw a route map and also need to discuss with other members. this shuold be done bry smartly and its a better time to you also to inhance your skills.
From India, Rudarpur
From India, Rudarpur
While restructuring salaries of existing employees, utmost care need to be taken that the take home pay before and after restructuring must be nearly same or higher. In such case, there shall be no resentment amongst staff. After a draft restructuring, the staff must be taken in to confidence by explaining to them the benefit, they shall be getting post restructuring of salary proposed by you.
The CTC (Cost To The Company) salary structure may consists 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 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 employee. Conveyance allowance up to Rs. 1600/- per month is Exempt under Income Tax Act)
4. Special Allowance - This will be 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 sum total of 1 to 7
Modification may be incorporated in above depending upon industry/trade standard.
Jawaharlal Moondra
98290 28028
From India, Jodhpur
The CTC (Cost To The Company) salary structure may consists 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 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 employee. Conveyance allowance up to Rs. 1600/- per month is Exempt under Income Tax Act)
4. Special Allowance - This will be 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 sum total of 1 to 7
Modification may be incorporated in above depending upon industry/trade standard.
Jawaharlal Moondra
98290 28028
From India, Jodhpur
In the above pay structure as mentioned by Mr. Moondra, I have the following observations:-
1.In case of HRA there are 3 tests - HRA paid minus 10% of Basic, 40% or 50% of basic for non metro & 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 monthly gross minus HRA subject to maximum on 15,000/- per month if employer thinks so. This is as per Apex court verdict.
4.In case of Gratuity how you have arrived 1 / 24 of 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 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
1.In case of HRA there are 3 tests - HRA paid minus 10% of Basic, 40% or 50% of basic for non metro & 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 monthly gross minus HRA subject to maximum on 15,000/- per month if employer thinks so. This is as per Apex court verdict.
4.In case of Gratuity how you have arrived 1 / 24 of 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 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
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 the staff and each of them have detailed Job Descriptions.
3. Then bring all the Designations into different GRADES which is called GRADATION.
4. Then develop SCALES OF PAY for each Grade.
5. Then fit the present Consolidated Salary in the respective Scale of pay, which is called FITTMENT.
6. Issue office Orders for the new structure.
Regards
From India, Chennai
1. Ascertain the Organizational Structure.
2. Ensure that clear Designations are available for all the staff and each of them have detailed Job Descriptions.
3. Then bring all the Designations into different GRADES which is called GRADATION.
4. Then develop SCALES OF PAY for each Grade.
5. Then fit the present Consolidated Salary in the respective Scale of pay, which is called FITTMENT.
6. Issue office Orders for the new structure.
Regards
From India, Chennai
The undersigned has given just the broad guide lines and not the precise calculation applicable for each and every employee in an organisation. The indicative details are based on a back of envelop calculation and while designing a perfect structure, various other factors are also required to be taken.
1. In case of HRA component, as already mentioned, it is tax exempt only if employee stays in a rented premises. For others not staying in rented premises or paying less rent than the balance excess amount is taxable.
2. The conveyance allowance of Rs.1600/- is exempt for all employees and is not covered under standard deduction of Rs. 50,000/- and these amount are same for all irrespective of the salary bracket under which an employee falls.
3. The employee is not concerned with the 1% admin charges required to be paid by the employer. The employer share is just 12% of basic pay has only been calculated for CTC part. In order to retain the skill and trained employee, an organisation may be required to pay PF contribution on entire basic component of salary.
4. Incase 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 comes to monthly salary and 1/2 of that comes 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 its is 15/26 of the basic component of last pay drawn.
Jawaharlal Moondra
98290 28028
From India, Jodhpur
1. In case of HRA component, as already mentioned, it is tax exempt only if employee stays in a rented premises. For others not staying in rented premises or paying less rent than the balance excess amount is taxable.
2. The conveyance allowance of Rs.1600/- is exempt for all employees and is not covered under standard deduction of Rs. 50,000/- and these amount are same for all irrespective of the salary bracket under which an employee falls.
3. The employee is not concerned with the 1% admin charges required to be paid by the employer. The employer share is just 12% of basic pay has only been calculated for CTC part. In order to retain the skill and trained employee, an organisation may be required to pay PF contribution on entire basic component of salary.
4. Incase 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 comes to monthly salary and 1/2 of that comes 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 its is 15/26 of the basic component of last pay drawn.
Jawaharlal Moondra
98290 28028
From India, Jodhpur
Thanks Mr. Moondra for your clarification. I am not interested to elaborate again the confusion areas. As lot of young professionals are following the posts, let us be absolutely clear before posting anything specially for mathematical application part. There are issues where different reply may be happen due to different interpretation and different thought process. But in any mathematical calculation it is always 1 + 1 = 2 and never be 3 or 4.
For one example- In case of gratuity calculation you have mentioned 1 / 2 is equivalent to 15 days salary. As per PG Act whatever may be the mode of payment, the per day salary must be determined by diving the monthly salary by 26 which is not 1 /2 of monthly salary. 15 /26 fraction is not equivalent to 1/2 but 15/30 fraction is equivalent to 1/2 which is not complying the PG Act.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
www,usdhrs.in
From India, New Delhi
For one example- In case of gratuity calculation you have mentioned 1 / 2 is equivalent to 15 days salary. As per PG Act whatever may be the mode of payment, the per day salary must be determined by diving the monthly salary by 26 which is not 1 /2 of monthly salary. 15 /26 fraction is not equivalent to 1/2 but 15/30 fraction is equivalent to 1/2 which is not complying the PG Act.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
www,usdhrs.in
From India, New Delhi
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