Dear Sir,
Thank you for the reply. I still need some clarification.
The above-mentioned amount (Rs. 30,000) is the gross salary of the employee. PF employer contribution and ESI are extra payments but part of the CTC. We are paying statutory bonus along with ex gratia (which is more than the minimum bonus - subject to company performance) once a year. We have additional employee benefits like Incentive (1-month salary, paid once a year), LTA (Basic+DA, paid once a year), and Medical reimbursement (Basic+DA, quarterly). Adding all together, CTC will be Rs. 40,000 per month (approx). So, should I consider 50% wages and exemptions out of Rs. 40,000? So, the monthly Basic + DA will be Rs. 20,000 and exemptions will be Rs. 10,000.
What if the employee is drawing a gross salary of Rs. 50,000 (Basic+DA Rs. 30,000, others Rs. 20,000)? He is out of statutory bonus eligibility (we are paying ex gratia), but his total CTC will be Rs. 70,000 per month (approx).
From India, Bengaluru
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Thank you for the reply. I still need some clarification.
The above-mentioned amount (Rs. 30,000) is the gross salary of the employee. PF employer contribution and ESI are extra payments but part of the CTC. We are paying statutory bonus along with ex gratia (which is more than the minimum bonus - subject to company performance) once a year. We have additional employee benefits like Incentive (1-month salary, paid once a year), LTA (Basic+DA, paid once a year), and Medical reimbursement (Basic+DA, quarterly). Adding all together, CTC will be Rs. 40,000 per month (approx). So, should I consider 50% wages and exemptions out of Rs. 40,000? So, the monthly Basic + DA will be Rs. 20,000 and exemptions will be Rs. 10,000.
What if the employee is drawing a gross salary of Rs. 50,000 (Basic+DA Rs. 30,000, others Rs. 20,000)? He is out of statutory bonus eligibility (we are paying ex gratia), but his total CTC will be Rs. 70,000 per month (approx).
From India, Bengaluru
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Dear Sir,
I am working in a pharmaceutical company. My monthly gross salary is Rs. 26,566, and my CTC is Rs. 30,869. The breakup is as follows: Basic - Rs. 13,283 (50% of Gross Salary), HRA - Rs. 7,970 (60% of Basic), LTA - Rs. 833, Special Allowance - Rs. 4,480. The total gross salary as calculated is Rs. 26,566 per month. Additionally, there is a festival bonus and ex-gratia of Rs. 833, a performance bonus of Rs. 531, Mediclaim of Rs. 400, Group Personal Accident cover of Rs. 25, Gratuity of Rs. 639, and Employer PF including PF contribution Admin Charges of Rs. 1,875 (based on Rs. 15,000). Please note that our company calculates PF as follows: for Gross salary above Rs. 15,000 and below Rs. 15,000, it is calculated on the actual amount. The total CTC calculated is Rs. 30,869.
I would like to know if this structure aligns with the new wages rule. If not, kindly guide me on what the perfect salary structure should be as per the new wages rule effective from 01.04.2021.
Regards,
Tarak Shaw
From India, Kolkata
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7I am working in a pharmaceutical company. My monthly gross salary is Rs. 26,566, and my CTC is Rs. 30,869. The breakup is as follows: Basic - Rs. 13,283 (50% of Gross Salary), HRA - Rs. 7,970 (60% of Basic), LTA - Rs. 833, Special Allowance - Rs. 4,480. The total gross salary as calculated is Rs. 26,566 per month. Additionally, there is a festival bonus and ex-gratia of Rs. 833, a performance bonus of Rs. 531, Mediclaim of Rs. 400, Group Personal Accident cover of Rs. 25, Gratuity of Rs. 639, and Employer PF including PF contribution Admin Charges of Rs. 1,875 (based on Rs. 15,000). Please note that our company calculates PF as follows: for Gross salary above Rs. 15,000 and below Rs. 15,000, it is calculated on the actual amount. The total CTC calculated is Rs. 30,869.
I would like to know if this structure aligns with the new wages rule. If not, kindly guide me on what the perfect salary structure should be as per the new wages rule effective from 01.04.2021.
Regards,
Tarak Shaw
From India, Kolkata
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Dear Asif,
In the CTC of the employee, the company can consider all costs spending for the employee. However, to determine wages as per the wage code, subtract ESI contribution and any other amounts that are not payable to the employee (such as insurance premium, canteen subsidy, etc.). Then, 50% of the remaining amount will be considered as wages as per the definition of wages under the wage code. This calculation is independent of the monthly gross salary.
Dear Tarak,
As mentioned above, it should be straightforward for you to calculate your case. Nevertheless, for your convenience, I am providing specific guidance on how to calculate based on your data.
Deduct Mediclaim, Group Personal Accident, Gratuity, and Admin charge of PF from your CTC. After this deduction, 50% of the remaining amount will be allocated as Basic and DA.
It is not feasible to individually calculate each case that is forwarded to me every day. Some organizations seek assistance from my office to ensure their employees' compliance with the wage code. If anyone requires such support, please contact us at usdhrs@gmail.com.
Due to the varied nature of existing remuneration structures across organizations and the unique approach of the wage code, a comprehensive study is necessary to restructure the current system based on the wage code's definition of wages.
Thanks and Regards,
S K Bandyopadhyay (West Bengal, Howrah) CEO-USD HR Solutions
From India, New Delhi
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In the CTC of the employee, the company can consider all costs spending for the employee. However, to determine wages as per the wage code, subtract ESI contribution and any other amounts that are not payable to the employee (such as insurance premium, canteen subsidy, etc.). Then, 50% of the remaining amount will be considered as wages as per the definition of wages under the wage code. This calculation is independent of the monthly gross salary.
Dear Tarak,
As mentioned above, it should be straightforward for you to calculate your case. Nevertheless, for your convenience, I am providing specific guidance on how to calculate based on your data.
Deduct Mediclaim, Group Personal Accident, Gratuity, and Admin charge of PF from your CTC. After this deduction, 50% of the remaining amount will be allocated as Basic and DA.
It is not feasible to individually calculate each case that is forwarded to me every day. Some organizations seek assistance from my office to ensure their employees' compliance with the wage code. If anyone requires such support, please contact us at usdhrs@gmail.com.
Due to the varied nature of existing remuneration structures across organizations and the unique approach of the wage code, a comprehensive study is necessary to restructure the current system based on the wage code's definition of wages.
Thanks and Regards,
S K Bandyopadhyay (West Bengal, Howrah) CEO-USD HR Solutions
From India, New Delhi
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Dear Oneus_tomoon,
I am not agree with the Wages Structure.
As per my understanding, the Code allows maximum 50% exclusion components from the Wages (means at least minimum 50% part of the Gross Wages/CTC will be countable for calculating statutory benefits like PF, ESI, Statutory Bonus, Gratuity, EL etc.).
You have considered the HRA on lower side. It should be 40% or 50% of the Basic, so that employees can avail maximum Income Tax exemptions.
As per my opinion, for Gross Wages/CTC of Rs. 25,000, the idle structure should be:-
Basic = 12,500 (being 50%, or equal to all other excluded components)
HRA = 6,250
LTA = 1,000
Statutory Bonus = 1,041/-
Mobile Allowance, = 1,000
Special Allowance, - = 701
Monthly Gross = 22,492
Employer’s EPF = 1,500
Employer’s ESI = 407 (Since 50% wages excluded, hence ESI will also applicable)
Gratuity = 601
Total Wages = 25,000
Though Rs. 3 Lacs is very lower package to consider for Income Tax point of view. But I framed this keeping in view higher grade wages as well.
I request other seniors to share your inputs as well.
From India, Delhi
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I am not agree with the Wages Structure.
As per my understanding, the Code allows maximum 50% exclusion components from the Wages (means at least minimum 50% part of the Gross Wages/CTC will be countable for calculating statutory benefits like PF, ESI, Statutory Bonus, Gratuity, EL etc.).
You have considered the HRA on lower side. It should be 40% or 50% of the Basic, so that employees can avail maximum Income Tax exemptions.
As per my opinion, for Gross Wages/CTC of Rs. 25,000, the idle structure should be:-
Basic = 12,500 (being 50%, or equal to all other excluded components)
HRA = 6,250
LTA = 1,000
Statutory Bonus = 1,041/-
Mobile Allowance, = 1,000
Special Allowance, - = 701
Monthly Gross = 22,492
Employer’s EPF = 1,500
Employer’s ESI = 407 (Since 50% wages excluded, hence ESI will also applicable)
Gratuity = 601
Total Wages = 25,000
Though Rs. 3 Lacs is very lower package to consider for Income Tax point of view. But I framed this keeping in view higher grade wages as well.
I request other seniors to share your inputs as well.
From India, Delhi
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The above calculation from Mr. Pan Singh Dangwal is absolutely okay. That does not mean the calculation made by Mr. Oneus is wrong. The Wage Code has not mentioned not to pay more than the guideline given in the Wages definition. It depends on the capacity of the industry to pay. The Wages (Basic) amount as per Mr. Oneus' calculation is 15,000/-, which is more than the guideline of the wage code, and the 50:50 conditions have been fulfilled in the calculation. As HR professionals, we should not only think about the optimization of the remuneration structure but also consider if the organization has the capacity to pay more.
As per the definition of Wages, all remuneration by way of salaries, allowances, or otherwise expressed in terms of money payable to any employee should be considered. In the 50% exclusion, ESI is not there and also not payable to the employee. Therefore, for the calculation of all remuneration under the definition of Wages, ESI, any other insurance premium, subsidy for the canteen, transport cost if any, etc., should not be considered. The only exception in exclusion clause (b) is the value of any house accommodation or supply of light, water, medical services, etc. (provided by integrated steel plants, big power plants, etc.) - not payable to the employee but to be considered as part of Wages.
S K Bandyopadhyay (WB, Howrah)
CEO - USD HR Solutions
From India, New Delhi
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As per the definition of Wages, all remuneration by way of salaries, allowances, or otherwise expressed in terms of money payable to any employee should be considered. In the 50% exclusion, ESI is not there and also not payable to the employee. Therefore, for the calculation of all remuneration under the definition of Wages, ESI, any other insurance premium, subsidy for the canteen, transport cost if any, etc., should not be considered. The only exception in exclusion clause (b) is the value of any house accommodation or supply of light, water, medical services, etc. (provided by integrated steel plants, big power plants, etc.) - not payable to the employee but to be considered as part of Wages.
S K Bandyopadhyay (WB, Howrah)
CEO - USD HR Solutions
From India, New Delhi
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Dear Mr. S. K. Bandyopadhyay,
Thank you for your appreciation of my Wages Structure. I understand that if the company has the capacity to pay more, then Basic Wages can also be fixed on the higher side. However, as you are aware, we are working in a dynamic world where, as professionals, we need to frame the structure considering various aspects such as Take-Home pay, cost-effectiveness, tax-friendliness, and ease of understanding.
In my reply, I specifically mentioned that the HRA considered on the lower side by Mr. Oneus may cause trouble for employees in higher tax brackets. Additionally, for wages of 25,000/- (when 50% is excluded), the remaining wages fall under the purview of ESI, which I also highlighted.
When addressing such a typical issue, it is essential to cover all aspects as the same information is read by many freshers and juniors. As senior members, we are expected to provide the best solutions. I hope that you and others will agree with my points. I do not claim that my structure is perfect because I have not thoroughly gone through the Act to date.
Furthermore, creating a Salary Structure is not my core activity; therefore, I have requested input from other seniors.
Thank you.
From India, Delhi
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Thank you for your appreciation of my Wages Structure. I understand that if the company has the capacity to pay more, then Basic Wages can also be fixed on the higher side. However, as you are aware, we are working in a dynamic world where, as professionals, we need to frame the structure considering various aspects such as Take-Home pay, cost-effectiveness, tax-friendliness, and ease of understanding.
In my reply, I specifically mentioned that the HRA considered on the lower side by Mr. Oneus may cause trouble for employees in higher tax brackets. Additionally, for wages of 25,000/- (when 50% is excluded), the remaining wages fall under the purview of ESI, which I also highlighted.
When addressing such a typical issue, it is essential to cover all aspects as the same information is read by many freshers and juniors. As senior members, we are expected to provide the best solutions. I hope that you and others will agree with my points. I do not claim that my structure is perfect because I have not thoroughly gone through the Act to date.
Furthermore, creating a Salary Structure is not my core activity; therefore, I have requested input from other seniors.
Thank you.
From India, Delhi
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Dear Mr. Pan Singh Dangwal,
I am now 68 and running towards my 69th year. I do not know how old you are. I always appreciate people who add value to the system. Although salary structure is not your core activity, the fact that you have correctly aligned one structure as per the wage code is truly admirable. Your suggestions regarding HRA, etc., are well-received by me.
Please continue to contribute your expertise, acumen, and intelligence on a continuous basis for the betterment of the larger society.
Thanks & Regards,
S K Bandyopadhyay
CEO-USD HR Solutions
From India, New Delhi
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I am now 68 and running towards my 69th year. I do not know how old you are. I always appreciate people who add value to the system. Although salary structure is not your core activity, the fact that you have correctly aligned one structure as per the wage code is truly admirable. Your suggestions regarding HRA, etc., are well-received by me.
Please continue to contribute your expertise, acumen, and intelligence on a continuous basis for the betterment of the larger society.
Thanks & Regards,
S K Bandyopadhyay
CEO-USD HR Solutions
From India, New Delhi
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Dear Saswata Sir,
Can you please explain about the EPF & EPS wages as of now? If an employee's gross salary is Rs. 45,000/-, in this case, can we calculate his EPF & EPS wages as Rs. 15,000/- maximum and deduct @12%, i.e. Rs. 1,800/- as PF contribution?
Regards, Tarak Shaw
From India, Kolkata
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Can you please explain about the EPF & EPS wages as of now? If an employee's gross salary is Rs. 45,000/-, in this case, can we calculate his EPF & EPS wages as Rs. 15,000/- maximum and deduct @12%, i.e. Rs. 1,800/- as PF contribution?
Regards, Tarak Shaw
From India, Kolkata
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Dear Tarak,
As things stand now, your work is correct. The maximum statutory deduction is ₹1,800. Any deduction beyond that will be a voluntary deduction (approval of the employee in writing is necessary), and the employer may or may not contribute beyond ₹1,800.
Please also remember that in the case of additional deductions, the total deduction of all items cannot exceed 50% of gross wages.
From India, Mumbai
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As things stand now, your work is correct. The maximum statutory deduction is ₹1,800. Any deduction beyond that will be a voluntary deduction (approval of the employee in writing is necessary), and the employer may or may not contribute beyond ₹1,800.
Please also remember that in the case of additional deductions, the total deduction of all items cannot exceed 50% of gross wages.
From India, Mumbai
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Minimum Wage of UP & UK.pdf