Hello All,
Kindly ignore my last post and consider this one.
According to the new labor code, it states that basic+DA and other allowances should be in a 50:50 ratio. Some have commented that "these allowances" mean components which consist and are part of the GROSS, while others have said that any payment received by the employee should include LTA, yearly performance bonus, leave encashment, overtime allowance, and Employer's PF.
So, if CTC is 450,000 then:
- BASIC: 18,750
- HRA: 9,375
- MPP: 5,000
- GROSS: 33,125
- Employer's PF: 2,250
- Gratuity: 901
- Total Remuneration: 36,276
- LTA: 5,000 (paid annually)
- Performance bonus: 10,000 (paid annually)
1. Does the above example meet all the rules of the new labor code?
2. Can I consider this 50:50 ratio with monthly gross, or should the annual component also be considered in the computation?
3. Overtime allowance is not fixed; it depends on the requirement. How can it be considered during CTC computation? It varies every month, so when an employee receives this OT allowance, the 50:50 percentage will be impacted.
I would be highly obliged if you could answer my above questions.
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2Kindly ignore my last post and consider this one.
According to the new labor code, it states that basic+DA and other allowances should be in a 50:50 ratio. Some have commented that "these allowances" mean components which consist and are part of the GROSS, while others have said that any payment received by the employee should include LTA, yearly performance bonus, leave encashment, overtime allowance, and Employer's PF.
So, if CTC is 450,000 then:
- BASIC: 18,750
- HRA: 9,375
- MPP: 5,000
- GROSS: 33,125
- Employer's PF: 2,250
- Gratuity: 901
- Total Remuneration: 36,276
- LTA: 5,000 (paid annually)
- Performance bonus: 10,000 (paid annually)
1. Does the above example meet all the rules of the new labor code?
2. Can I consider this 50:50 ratio with monthly gross, or should the annual component also be considered in the computation?
3. Overtime allowance is not fixed; it depends on the requirement. How can it be considered during CTC computation? It varies every month, so when an employee receives this OT allowance, the 50:50 percentage will be impacted.
I would be highly obliged if you could answer my above questions.
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Answers to your queries are as follows:
1. Yes.
2. Annual cash components. In this case, excluding Gratuity (as it is totally exempted in the wage definition).
3. Overtime (OT) is really difficult to calculate. It will vary every month and needs to be added to the wage. The objective of the lawmakers is to minimize OT through optimal manpower planning.
S K Bandyopadhyay (Howrah, WB)
Email: skb@usdhrs.in
From India, New Delhi
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1. Yes.
2. Annual cash components. In this case, excluding Gratuity (as it is totally exempted in the wage definition).
3. Overtime (OT) is really difficult to calculate. It will vary every month and needs to be added to the wage. The objective of the lawmakers is to minimize OT through optimal manpower planning.
S K Bandyopadhyay (Howrah, WB)
Email: skb@usdhrs.in
From India, New Delhi
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Thank you, Mr. Bandyopadhyay.
1. Every month, we have a shift allowance for a few employees, and it varies. Do we have to consider it under "wages" for PF?
2. Should yearly components, such as one-time payments, leave encashment, LTA, performance bonus, and long-term service bonus, also be considered under wages?
3. We have been paying PF contributions based on the actual basic pay of the employee. Can we now consider paying based on the PF wage ceiling of 15,000/-, or is this not permissible?
Thank you in advance.
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1. Every month, we have a shift allowance for a few employees, and it varies. Do we have to consider it under "wages" for PF?
2. Should yearly components, such as one-time payments, leave encashment, LTA, performance bonus, and long-term service bonus, also be considered under wages?
3. We have been paying PF contributions based on the actual basic pay of the employee. Can we now consider paying based on the PF wage ceiling of 15,000/-, or is this not permissible?
Thank you in advance.
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Answer to your questions 1, 2 & 3 are all "YES." This is really a challenge for HR professionals on how to reschedule the remuneration structure in the new regime. This will vary from organization to organization.
S K Bandyopadhyay (Howrah, WB)
From India, New Delhi
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S K Bandyopadhyay (Howrah, WB)
From India, New Delhi
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Can anyone assist me on the new wage code CTC part? Our company only includes HRA in the CTC structure and conveyance for only the sales team.
In this scenario, can anyone suggest the best CTC structure which includes PF, ESIC, PT?
From India
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In this scenario, can anyone suggest the best CTC structure which includes PF, ESIC, PT?
From India
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Dear Sam,
Your CTC structure may include Basic, HRA, Employer's portion of PF & ESIC, Statutory Bonus, and for the Sales team, Conveyance will also be added.
In your existing structure, add all components except ESIC for each employee. 50% of that should be allocated to Basic, and the remaining 50% should be divided among the others (HRA, Employer's portion of PF, Statutory Bonus, Conveyance - as applicable).
Thanks & Regards,
S K Bandyopadhyay (Howrah, WB)
www.usdhrs.in
From India, New Delhi
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Your CTC structure may include Basic, HRA, Employer's portion of PF & ESIC, Statutory Bonus, and for the Sales team, Conveyance will also be added.
In your existing structure, add all components except ESIC for each employee. 50% of that should be allocated to Basic, and the remaining 50% should be divided among the others (HRA, Employer's portion of PF, Statutory Bonus, Conveyance - as applicable).
Thanks & Regards,
S K Bandyopadhyay (Howrah, WB)
www.usdhrs.in
From India, New Delhi
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In my opinion, the salary should encompass all allowances that an employee receives while on duty or on leave, regardless of any ratio like 50:50. It should only exclude payments that the employer is obligated to make, such as PF, ESI, Bonus, and Gratuity. Allowing only 50 percent excess of other components (excluding basic wages) to be added to basic wages would enable employers to maintain a low basic salary and high allowances, resulting in a lower qualifying salary for PF, Bonus, or gratuity.
I believe that segmenting the salary itself is a flawed practice when considering the total salary (basic plus all allowances) for leave without pay deductions. Simply put, during unpaid leave, the gross salary is subject to deduction, not just the basic pay.
In certain PSUs like banks, officers receive rent allowance based on their grades and city, known as HRA. This allowance does not form part of the salary. If an officer takes leave without pay, the full HRA is paid, with deductions only from other salary components. Conversely, in many private establishments, HRA is included in the salary, leading to a proportional reduction in the gross salary during leave without pay, as is the case with other allowances.
The definition of wages in the new labour code may be subject to varying interpretations by different authorities and courts over time. I find the intentions of the lawmakers to be unfair to employees. For an employee, their salary is the total amount offered for their service. They are not concerned about the components but expect retirement benefits based on the salary they receive. Unfortunately, they may receive minimal retirement benefits because the employer considered only a small component as wages. It is unfair to consider the gross salary for deductions during non-working periods and the basic salary plus 50% excess of other allowances for statutory benefits, including gratuity, as per the new code. This approach may face challenges similar to those encountered by PF qualifying salary.
Please visit the link [Madhu T K: Payment of Gratuity and Gratuity Qualifying Salary](http://madhu-t-k.blogspot.com/2019/10/payment-of-gratuity-and-gratuity.html)
From India, Kannur
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I believe that segmenting the salary itself is a flawed practice when considering the total salary (basic plus all allowances) for leave without pay deductions. Simply put, during unpaid leave, the gross salary is subject to deduction, not just the basic pay.
In certain PSUs like banks, officers receive rent allowance based on their grades and city, known as HRA. This allowance does not form part of the salary. If an officer takes leave without pay, the full HRA is paid, with deductions only from other salary components. Conversely, in many private establishments, HRA is included in the salary, leading to a proportional reduction in the gross salary during leave without pay, as is the case with other allowances.
The definition of wages in the new labour code may be subject to varying interpretations by different authorities and courts over time. I find the intentions of the lawmakers to be unfair to employees. For an employee, their salary is the total amount offered for their service. They are not concerned about the components but expect retirement benefits based on the salary they receive. Unfortunately, they may receive minimal retirement benefits because the employer considered only a small component as wages. It is unfair to consider the gross salary for deductions during non-working periods and the basic salary plus 50% excess of other allowances for statutory benefits, including gratuity, as per the new code. This approach may face challenges similar to those encountered by PF qualifying salary.
Please visit the link [Madhu T K: Payment of Gratuity and Gratuity Qualifying Salary](http://madhu-t-k.blogspot.com/2019/10/payment-of-gratuity-and-gratuity.html)
From India, Kannur
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CTC-Salary Break Up.pdf
CTC Break up.xls