Dear All,
I request you all to please share the new CTC break-up/Xls post the new Social Security Code 2020 being implemented by the government from April 2021. Kindly consider 2-3 examples for easy understanding for all.
Thanks & Regards
From India, Mumbai
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57I request you all to please share the new CTC break-up/Xls post the new Social Security Code 2020 being implemented by the government from April 2021. Kindly consider 2-3 examples for easy understanding for all.
Thanks & Regards
From India, Mumbai
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Dear Prasad,
Sec. 2(y) of the Code on Wages, 2019 defines the term "wages" by inclusion and exclusion of certain common components of the wage structure. It further stipulates that whenever the sum of excluded components increases by over 50% of the monthly gross wages, that excess amount would be adjusted against the shortfall in the sum total of the included components, namely Basic, D.A., and Retaining Allowance. Since this restriction acts as a preventive measure against the exploitative tendency of some employers to reduce their indirect financial commitments, you have to devise your CTC structure in such a manner that the sum of basic pay and D.A. does not fall below 50% of the gross monthly salary.
From India, Salem
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Sec. 2(y) of the Code on Wages, 2019 defines the term "wages" by inclusion and exclusion of certain common components of the wage structure. It further stipulates that whenever the sum of excluded components increases by over 50% of the monthly gross wages, that excess amount would be adjusted against the shortfall in the sum total of the included components, namely Basic, D.A., and Retaining Allowance. Since this restriction acts as a preventive measure against the exploitative tendency of some employers to reduce their indirect financial commitments, you have to devise your CTC structure in such a manner that the sum of basic pay and D.A. does not fall below 50% of the gross monthly salary.
From India, Salem
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Explanation on Wages Definition
There are 3 important steps in the definition of wages -
1. Wages means all remuneration by way of salaries, allowances or otherwise & includes Basic Pay, Dearness Allowance & Retaining Allowance if any.
2. Exclusion List –
(i) Statutory Bonus,
(ii) Value of any house accommodation or the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of the wages.
(iii) Any contribution paid by the employer to any pension or provident fund,
(iv) Any conveyance allowance or the value of any travel concession (LTA, LTC etc.),
(v) Any sum paid to the employed person to defray special expenses entitled on him by the nature of his employment,
(vi) House Rent Allowance,
(vii) Remuneration payable any award or settlement between the parties or an order of a court or tribunal,
(viii) Overtime,
(ix) Commission Payable to the employee
3. If the payment made by the employer to the employee as per exclusion list exceeds 50% of the all remuneration (CTC) calculated under this clause, the amount which exceeds 50% shall be deemed as remuneration & shall be accordingly added in wages.
As the exclusion list is exhaustive & if any employer is interested to pay to any other pocket other than exclusion list (e.g. CCA, any kind of Incentive, Leave Encashment, Insurance etc. as a part of CTC) may or may not be considered as a part of the wages.( Not properly explained under wage code )
To determine the wage structure for any employee let us consider the following examples :
Option - 1
Monthly CTC : 20000/-
Basic : 10000/-,
Employer PF : 1200/-,
Bonus : 833/- (Considering Minimum Wages is 10000/- @ 8.33% level).
Therefore, the other allowances will be (10000-1200-833) = Rs. 7967/- (Appx. 40% of 20000/-).
Hence, the Monthly Gross salary will be (10000+7967) = 17967/-
Therefore, as it appears that basic is becoming 60% appx. & other allowances are 40% at the monthly gross level
This % will again be changed ( more Basic % ) due effect of OT, LTA, Higher % of Bonus etc..
Option – 2:
Monthly CTC : 41667/-
Basic : 20833/-,
Employer PF : 2500/-,(Paid 12% of entire Basic)
Bonus : 833/- (Considering Minimum Wages is 10000/- @ 8.33% level).
Therefore, the other allowances will be (20833-2500-833) = Rs. 17500/- (Appx. 42% of 41667/-).
Hence, the Monthly Gross salary will be (20833+17500) = 38333/-
The equation will again be changed if there is LTA or other payments.
Option - 3
Monthly CTC : 41667/-
Basic : 20833/-,
Employer PF : 1800/- (PF Basic restricted to 15000/-),
Bonus : 833/- (Considering Minimum Wages is 10000/- @ 8.33% level).
Therefore, the other allowances will be (20833-1800-833) = Rs. 18200/- (Appx. 43% of 41667/-).
Hence, the Monthly Gross salary will be (20833+18200) = 39033/-
In all the cases, if we consider higher percentage of bonus & overtime, it will be safe side to make Basic 65% to 70% of the monthly gross salary & 35% to 30% is the other allowances within the exhaustive list of exclusion ( HRA, Conv. etc.)
S K Bandyopadhyay ( Howrah,WB)
From India, New Delhi
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There are 3 important steps in the definition of wages -
1. Wages means all remuneration by way of salaries, allowances or otherwise & includes Basic Pay, Dearness Allowance & Retaining Allowance if any.
2. Exclusion List –
(i) Statutory Bonus,
(ii) Value of any house accommodation or the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of the wages.
(iii) Any contribution paid by the employer to any pension or provident fund,
(iv) Any conveyance allowance or the value of any travel concession (LTA, LTC etc.),
(v) Any sum paid to the employed person to defray special expenses entitled on him by the nature of his employment,
(vi) House Rent Allowance,
(vii) Remuneration payable any award or settlement between the parties or an order of a court or tribunal,
(viii) Overtime,
(ix) Commission Payable to the employee
3. If the payment made by the employer to the employee as per exclusion list exceeds 50% of the all remuneration (CTC) calculated under this clause, the amount which exceeds 50% shall be deemed as remuneration & shall be accordingly added in wages.
As the exclusion list is exhaustive & if any employer is interested to pay to any other pocket other than exclusion list (e.g. CCA, any kind of Incentive, Leave Encashment, Insurance etc. as a part of CTC) may or may not be considered as a part of the wages.( Not properly explained under wage code )
To determine the wage structure for any employee let us consider the following examples :
Option - 1
Monthly CTC : 20000/-
Basic : 10000/-,
Employer PF : 1200/-,
Bonus : 833/- (Considering Minimum Wages is 10000/- @ 8.33% level).
Therefore, the other allowances will be (10000-1200-833) = Rs. 7967/- (Appx. 40% of 20000/-).
Hence, the Monthly Gross salary will be (10000+7967) = 17967/-
Therefore, as it appears that basic is becoming 60% appx. & other allowances are 40% at the monthly gross level
This % will again be changed ( more Basic % ) due effect of OT, LTA, Higher % of Bonus etc..
Option – 2:
Monthly CTC : 41667/-
Basic : 20833/-,
Employer PF : 2500/-,(Paid 12% of entire Basic)
Bonus : 833/- (Considering Minimum Wages is 10000/- @ 8.33% level).
Therefore, the other allowances will be (20833-2500-833) = Rs. 17500/- (Appx. 42% of 41667/-).
Hence, the Monthly Gross salary will be (20833+17500) = 38333/-
The equation will again be changed if there is LTA or other payments.
Option - 3
Monthly CTC : 41667/-
Basic : 20833/-,
Employer PF : 1800/- (PF Basic restricted to 15000/-),
Bonus : 833/- (Considering Minimum Wages is 10000/- @ 8.33% level).
Therefore, the other allowances will be (20833-1800-833) = Rs. 18200/- (Appx. 43% of 41667/-).
Hence, the Monthly Gross salary will be (20833+18200) = 39033/-
In all the cases, if we consider higher percentage of bonus & overtime, it will be safe side to make Basic 65% to 70% of the monthly gross salary & 35% to 30% is the other allowances within the exhaustive list of exclusion ( HRA, Conv. etc.)
S K Bandyopadhyay ( Howrah,WB)
From India, New Delhi
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Dear All Many Thanks for your suggestions Regards Mahesh K Prasad
From India, Mumbai
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From India, Mumbai
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Hello, we are giving monthly remuneration as below to one of our employees:
Basis: $14,000
HRA: $7,000
Conveyance: $1,600
Special allowance: $14,400
Total: $37,000 per month
Employer PF: $1,800 monthly
We also have annual payments as below:
Annual allowance LTA/Medical: $20,000
Bonus: $12,600
Performance payment: Varies but is about $40,000
Leave encashment: Varies but is about $30,000
We also put money in the Gratuity account every year as per calculations based on increased basic.
In this case, how do we have to restructure the wages as per the new codes, keeping the same annual CTC?
From India, Aurangabad
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Basis: $14,000
HRA: $7,000
Conveyance: $1,600
Special allowance: $14,400
Total: $37,000 per month
Employer PF: $1,800 monthly
We also have annual payments as below:
Annual allowance LTA/Medical: $20,000
Bonus: $12,600
Performance payment: Varies but is about $40,000
Leave encashment: Varies but is about $30,000
We also put money in the Gratuity account every year as per calculations based on increased basic.
In this case, how do we have to restructure the wages as per the new codes, keeping the same annual CTC?
From India, Aurangabad
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Hi HBJ,
The wages calculation is from line 2 to 5, and gross wages are mentioned in line 6 as 37000/-. Now the employer has to merge the special allowance (Line 5) to basic and HRA to the extent that BASIC (Line 2) should not be lower than 18500/- (50% of 37000) in any case. If the employer is maintaining a cap of 15000 EPF (it appears from the calculation) that would not be affected.
The balance after Line 6 is annual payouts and does not get classified under wages. CTC and monthly wages are two different terms, and the new code is applicable to wages. CTC is the employer's terminology.
Please let me know if you need further clarification.
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The wages calculation is from line 2 to 5, and gross wages are mentioned in line 6 as 37000/-. Now the employer has to merge the special allowance (Line 5) to basic and HRA to the extent that BASIC (Line 2) should not be lower than 18500/- (50% of 37000) in any case. If the employer is maintaining a cap of 15000 EPF (it appears from the calculation) that would not be affected.
The balance after Line 6 is annual payouts and does not get classified under wages. CTC and monthly wages are two different terms, and the new code is applicable to wages. CTC is the employer's terminology.
Please let me know if you need further clarification.
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Thank you. How about Gratuity? The increase in basic will mean a lot more contribution to Gratuity for the years of service. Can that be a part of CTC?
From India, Aurangabad
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From India, Aurangabad
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Bifurcation of gross monthly wages shall be in the ratio of 50:50 in respect of the sum of basic pay plus dearness allowance vis-a-vis the sum of all other monthly allowances as per the definition of the term 'Wages' u/s 2(y) of the Code on Wages, 2019 which will come into force w.e.f 01-04-2021. It applies to all employees without any distinction of their cadre. If the ratio is disturbed on account of reasons like the application of CTC concept to the salary structure resulting in the reduction of the ratio of the basic component, there would be automatic restoration of the statutory ratio for the statutory computation of contribution towards EPF, ESi, Gratuity, Bonus, Retrenchment Compensation, etc.
Better restructure your CTC accordingly without violating the minimum wages, if any in force.
From India, Salem
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Better restructure your CTC accordingly without violating the minimum wages, if any in force.
From India, Salem
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Jugglery of numbers cannot hide the facts, viz at 14400/- basic, the employer pays 1800/- EPF (Line no 7). As per your post... and to reach this amount, the basic must be 15000/-. It is unfortunate in India that lower and middle-grade pay scale employees suffer the most, while the upper class enjoys lavish perks.
At lower levels, we should ask the employer to have a lenient view to make compliance above the ceiling, especially where the gross wages are below 15k. And yes, the Gratuity part would cost a little bit more, but the employer may opt for installments.
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At lower levels, we should ask the employer to have a lenient view to make compliance above the ceiling, especially where the gross wages are below 15k. And yes, the Gratuity part would cost a little bit more, but the employer may opt for installments.
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Dear Mr. Umakanthan and @Glidor,
Thank you for the replies. We are paying more than the minimum wages to everyone and also abiding by all the rules laid down. We also give an increase every year. However, sudden changes in rules, such as these, increase the cost without sometimes realizing it. For example, the employee with a basic salary of 14,400 may have received an increase of 1,200 or so in basic salary normally, but if we have to increase the basic by Rs. 4,000 per month, the amount of gratuity compensation increases tremendously for someone with 20 years of service. The gratuity for 20 years with, let's say, a 15,600 salary would be around 1,80,000, and for 18,500, it would be 2,13,500. So, the increase in gratuity contribution itself would be more than the regular annual increment. Are my calculations correct, or am I making a mistake? Is there any ceiling on the basic salary while calculating gratuity, like there is a ceiling of 15,000 for PF calculation?
From India, Aurangabad
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Thank you for the replies. We are paying more than the minimum wages to everyone and also abiding by all the rules laid down. We also give an increase every year. However, sudden changes in rules, such as these, increase the cost without sometimes realizing it. For example, the employee with a basic salary of 14,400 may have received an increase of 1,200 or so in basic salary normally, but if we have to increase the basic by Rs. 4,000 per month, the amount of gratuity compensation increases tremendously for someone with 20 years of service. The gratuity for 20 years with, let's say, a 15,600 salary would be around 1,80,000, and for 18,500, it would be 2,13,500. So, the increase in gratuity contribution itself would be more than the regular annual increment. Are my calculations correct, or am I making a mistake? Is there any ceiling on the basic salary while calculating gratuity, like there is a ceiling of 15,000 for PF calculation?
From India, Aurangabad
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CTC-Salary Break Up.pdf
CTC Break up.xls