Hi Everyone,
I have recently joined a small company. I am working on Payroll Manager as of now. There is no HR Department and Management is finding problem in Salary structure & some other issues related to HR. and till now, they were working with the help of some consultant in case of issues related to HR or taxation aspect of salary Component.
Here we dont have CTC criteria for employees and they have roughly done calculation of Basic, HRA, Conveyance, & other allow. Now i proposed them a revised salary structure
as below for eg:
CTC 50000
Basic 20000 (40% of CTC)
HRA 8000 (40% of Basic)
Conv 800 (800 fixed)
Medical 1250 fixed
LTA/ Bonus1666 8.33% of Basic
SPl Allow. 15783 Balance after all deduction
PF 1665 12%
Gratuity 836 4.18%
In Hand 47499
Is it correct.?
Now i am getting some Problems. need help to resolve.
1. The Spcl allowances is fully Taxable. I have to further bi-fur gate that should be tax friendly.
2. Further the PF Capped of Rs. 6500/-. Eg If old basic salary is 13825 & PF is calculating on that amounting Rs. 1659 (12% of Basic). Can i revise it as per law. I mean can i reduce it to Rs.780.
3. Bonus could be the part of CTC? what about the Old employees who are associated with the co. from last 15-20 yrs.
4. Can we offer Gratuity as part of CTC for newly Joined Employees
5. if i Revise the salary structure, can i increase or decrease the PF of any person? is it disregard the PF Act.?
Thank you in advance and please ignore the grammatical mistake.
Regards,
Anju
From India, New Delhi
I have recently joined a small company. I am working on Payroll Manager as of now. There is no HR Department and Management is finding problem in Salary structure & some other issues related to HR. and till now, they were working with the help of some consultant in case of issues related to HR or taxation aspect of salary Component.
Here we dont have CTC criteria for employees and they have roughly done calculation of Basic, HRA, Conveyance, & other allow. Now i proposed them a revised salary structure
as below for eg:
CTC 50000
Basic 20000 (40% of CTC)
HRA 8000 (40% of Basic)
Conv 800 (800 fixed)
Medical 1250 fixed
LTA/ Bonus1666 8.33% of Basic
SPl Allow. 15783 Balance after all deduction
PF 1665 12%
Gratuity 836 4.18%
In Hand 47499
Is it correct.?
Now i am getting some Problems. need help to resolve.
1. The Spcl allowances is fully Taxable. I have to further bi-fur gate that should be tax friendly.
2. Further the PF Capped of Rs. 6500/-. Eg If old basic salary is 13825 & PF is calculating on that amounting Rs. 1659 (12% of Basic). Can i revise it as per law. I mean can i reduce it to Rs.780.
3. Bonus could be the part of CTC? what about the Old employees who are associated with the co. from last 15-20 yrs.
4. Can we offer Gratuity as part of CTC for newly Joined Employees
5. if i Revise the salary structure, can i increase or decrease the PF of any person? is it disregard the PF Act.?
Thank you in advance and please ignore the grammatical mistake.
Regards,
Anju
From India, New Delhi
Hi
As per my knowledge in case of PF, you not need to reduce Basic salary to give benefit of PF, in books you can continue with same basic and calculation and deduction of PF can be made on Rs.6500/-
Secondly you can include bonus in CTC
In case of increase or decrease in PF, most of the companies are not decreasing because any problem may arise and inquiry take place for reduction in PF
for ex. let’s think currently your all employees basic is greater than 60% of your gross salary , now if you revise structure with 50% basic than basic amount will be lesser than earlier but your basic meets the requirement of 50% of gross salary so in this case you may reduce but please take advice of any consultant before implementing
From India, Ahmadabad
22As per my knowledge in case of PF, you not need to reduce Basic salary to give benefit of PF, in books you can continue with same basic and calculation and deduction of PF can be made on Rs.6500/-
Secondly you can include bonus in CTC
In case of increase or decrease in PF, most of the companies are not decreasing because any problem may arise and inquiry take place for reduction in PF
for ex. let’s think currently your all employees basic is greater than 60% of your gross salary , now if you revise structure with 50% basic than basic amount will be lesser than earlier but your basic meets the requirement of 50% of gross salary so in this case you may reduce but please take advice of any consultant before implementing
From India, Ahmadabad
Hi Anju,
Appreciated your proactive approach wherein you mentioned what is your understanding and asked to be rectified of mistakes if any....
The answers to your queries -
Dear, your In hand is the amount that you take home...
So Basic + HRA + COnveyance + LTA + allowance + medical = GROSS
GROSS - Employee PF - Professional Tax - TDS (if applicable) = Net or In hand...
So from your example, your
GROSS = 47499 ....... (20000 + 8000 + 800 + 1250 + 1666 + 15783)
--------------------------------------------------------------------
Employee contribution to PF (depends on how your Co. wish to take it forward)
atleast 12% of 6500 = 780
or
12% of actual basic = 2400
(i failed to understand 12% came out to be different in your case,,,, Please mind that 12% is of basic or 6500)
Pls note I am assuming 12% of actual and hence will take 2400 in further calc
--------------------------------------------------------------------
Professional Tax = 200 pm (mar - jan) and 300 for feb
---------------------------------------------------------------------------------------
Monthly In hand/Net
Net = 47499 - 2400 - 200 ( - tax) = 44899 - tax
================================================== ======
CTC is usually calculated annually and it has -->
Annual Gross + Employer PF + (many companies put Gratuity + Bonus)
So in your case,
Annual GROSS = GROSS * 12 = 47499 * 12
Annual GROSS =5,69,988
Employer Monthly PF = 12% of monthly basic = 12% of 20000 = 2400
Employer's annual contribution to PF = 12 * 2400 = 28,800
Gratuity can be claimed by an employee only if he/she resigns/terminates/retires after a minimum continuous service of 5 years. However every year, Co has to put some amount in the Gratuity fund and hence many companies put this under CTC.
Gratuity amount to be deposited is calculated as-
15/26 * last drawn (basic + da)
Hence in your case, Gratuity = 15 / 26 * 20000 = 11,539
Bonus is on lumpsum a month's basic salary = 20000
CTC = 5,69,988 + 28,800 + 11539 + 20000 = 630327
================================================== ==
You can use mobile bills reimbursement... Since it is reimbursement, you'd reimburse it to the extent of the amount quoted in the bills or a max limit you wish to fix per month.... (for ex say 1500 pm)
CASE A: Bill of 1500 exactly
Fully gets paid by company and he saves tax on such reimbursement...
Case B: Bill more than 1500
Co. pays only 1500, additional amount is to be paid out-of-pocket of the employee.
So if it's reimbursement, the employee will get 1500 against the bill.
If the Co pays on his behalf, the additional amount can be deducted from the salary....
Case C: Bill less than 1500
Co. pays actual amount quoted in the bill and remaining amount is lapses (i.e. can't be adjusted for next month)
Similarly there is Food allowance.
If you give meal vouchers like Sodexo etc., they are fully tax exempted...
As per the law, you are to contribute from each side a min of 780 Rs pm towards PF account even if (Basic + DA) is more than 6500.... So there is not legal obligations on your end if you wish to revise your contribution to 12% of 6500 rather than 12% of actual Basic+DA
I don't know if Bonus forms a part of CTC, many companies do include...
About employees with 15-20 years experience, how does bonus matters to the no. of years served? Bonus is an annual bonus which is to be paid to the employees before completing of 8 or 9 months from book closure....
Again as I said earlier, many companies do put Gratuity in their CTC component... However if you are doing so, I would suggest you to include the explanation that Gratuity can be claimed only after 5 years of service is rendered except for employees who dies in the said period or those who attains disability
Can you elaborate... Didn't understand this query
From India, Mumbai
Appreciated your proactive approach wherein you mentioned what is your understanding and asked to be rectified of mistakes if any....
The answers to your queries -
Dear, your In hand is the amount that you take home...
So Basic + HRA + COnveyance + LTA + allowance + medical = GROSS
GROSS - Employee PF - Professional Tax - TDS (if applicable) = Net or In hand...
So from your example, your
GROSS = 47499 ....... (20000 + 8000 + 800 + 1250 + 1666 + 15783)
--------------------------------------------------------------------
Employee contribution to PF (depends on how your Co. wish to take it forward)
atleast 12% of 6500 = 780
or
12% of actual basic = 2400
(i failed to understand 12% came out to be different in your case,,,, Please mind that 12% is of basic or 6500)
Pls note I am assuming 12% of actual and hence will take 2400 in further calc
--------------------------------------------------------------------
Professional Tax = 200 pm (mar - jan) and 300 for feb
---------------------------------------------------------------------------------------
Monthly In hand/Net
Net = 47499 - 2400 - 200 ( - tax) = 44899 - tax
================================================== ======
CTC is usually calculated annually and it has -->
Annual Gross + Employer PF + (many companies put Gratuity + Bonus)
So in your case,
Annual GROSS = GROSS * 12 = 47499 * 12
Annual GROSS =5,69,988
Employer Monthly PF = 12% of monthly basic = 12% of 20000 = 2400
Employer's annual contribution to PF = 12 * 2400 = 28,800
Gratuity can be claimed by an employee only if he/she resigns/terminates/retires after a minimum continuous service of 5 years. However every year, Co has to put some amount in the Gratuity fund and hence many companies put this under CTC.
Gratuity amount to be deposited is calculated as-
15/26 * last drawn (basic + da)
Hence in your case, Gratuity = 15 / 26 * 20000 = 11,539
Bonus is on lumpsum a month's basic salary = 20000
CTC = 5,69,988 + 28,800 + 11539 + 20000 = 630327
================================================== ==
You can use mobile bills reimbursement... Since it is reimbursement, you'd reimburse it to the extent of the amount quoted in the bills or a max limit you wish to fix per month.... (for ex say 1500 pm)
CASE A: Bill of 1500 exactly
Fully gets paid by company and he saves tax on such reimbursement...
Case B: Bill more than 1500
Co. pays only 1500, additional amount is to be paid out-of-pocket of the employee.
So if it's reimbursement, the employee will get 1500 against the bill.
If the Co pays on his behalf, the additional amount can be deducted from the salary....
Case C: Bill less than 1500
Co. pays actual amount quoted in the bill and remaining amount is lapses (i.e. can't be adjusted for next month)
Similarly there is Food allowance.
If you give meal vouchers like Sodexo etc., they are fully tax exempted...
As per the law, you are to contribute from each side a min of 780 Rs pm towards PF account even if (Basic + DA) is more than 6500.... So there is not legal obligations on your end if you wish to revise your contribution to 12% of 6500 rather than 12% of actual Basic+DA
I don't know if Bonus forms a part of CTC, many companies do include...
About employees with 15-20 years experience, how does bonus matters to the no. of years served? Bonus is an annual bonus which is to be paid to the employees before completing of 8 or 9 months from book closure....
Again as I said earlier, many companies do put Gratuity in their CTC component... However if you are doing so, I would suggest you to include the explanation that Gratuity can be claimed only after 5 years of service is rendered except for employees who dies in the said period or those who attains disability
Can you elaborate... Didn't understand this query
From India, Mumbai
Dear Ms. Ankita,
Thank you for giving detailed replies on my queries.
The things which are still not clear.
1. The net in hand salary I calculated after deducting PF i.e. 47499 (50000 - PF- Gratuity)
(Pls Note no professional tax applicable here and about PF Calculations. Rs 1665 Includes Employee(12%)+ Employers(12%+1.61%) Share both. I forgot to mention this.)
I calculated this way. Why this isn’t correct?
2. Bonus
:
3. Bonus could be the part of CTC? what about the Old employees who are associated with the co. from last 15-20 yrs.
As I mentioned in my earlier post that presently there is No CTC criteria in the co. we have to implement the same in the co. So my question was how to calculate for the old employees. As previously Management is giving them One month salary (including all allowances) as a Bonus on Diwali. Let it be running the way it was..? or there could be some other option without harming employees benefits.
3.
5. if i Revise the salary structure, can i increase or decrease the PF of any person? is it disregard the PF Act.?
My question is
Present Salary Proposed
Salary-30500 30500
Basic 13825 12200
HRA 6100 4880
Conv 800 800
Medical 1250 1250
LTA/ 1152 1016
SPl Allow. 7373 10354
Less PF 1659 780
Net Salary-28841 29720
My Question is if I revise the salary structure the basic would be changed that effects PF calculation.
For eg Previously deducting1659 now comes to 780 after revising. Or vice-versa
Any legal obligation?
Thanks again.
Regards,
Anju
From India, New Delhi
Thank you for giving detailed replies on my queries.
The things which are still not clear.
1. The net in hand salary I calculated after deducting PF i.e. 47499 (50000 - PF- Gratuity)
(Pls Note no professional tax applicable here and about PF Calculations. Rs 1665 Includes Employee(12%)+ Employers(12%+1.61%) Share both. I forgot to mention this.)
I calculated this way. Why this isn’t correct?
2. Bonus
:
3. Bonus could be the part of CTC? what about the Old employees who are associated with the co. from last 15-20 yrs.
As I mentioned in my earlier post that presently there is No CTC criteria in the co. we have to implement the same in the co. So my question was how to calculate for the old employees. As previously Management is giving them One month salary (including all allowances) as a Bonus on Diwali. Let it be running the way it was..? or there could be some other option without harming employees benefits.
3.
5. if i Revise the salary structure, can i increase or decrease the PF of any person? is it disregard the PF Act.?
My question is
Present Salary Proposed
Salary-30500 30500
Basic 13825 12200
HRA 6100 4880
Conv 800 800
Medical 1250 1250
LTA/ 1152 1016
SPl Allow. 7373 10354
Less PF 1659 780
Net Salary-28841 29720
My Question is if I revise the salary structure the basic would be changed that effects PF calculation.
For eg Previously deducting1659 now comes to 780 after revising. Or vice-versa
Any legal obligation?
Thanks again.
Regards,
Anju
From India, New Delhi
Dear Ankita
How to calculate incentive as a part of CTC (Does it include in CTC) as in sales filed is company provide incentive to sales employees
Secondly PF apply to stipend or trainee employees ?
is there any rule like we can pay maximum this much salary to stipend or trainee employee ?
Is there any measurable difference in trainee and stipend person ? bcoz i feel both are same ! , if yes than what are the documents to prove that
From India, Ahmadabad
How to calculate incentive as a part of CTC (Does it include in CTC) as in sales filed is company provide incentive to sales employees
Secondly PF apply to stipend or trainee employees ?
is there any rule like we can pay maximum this much salary to stipend or trainee employee ?
Is there any measurable difference in trainee and stipend person ? bcoz i feel both are same ! , if yes than what are the documents to prove that
From India, Ahmadabad
Hello Dhruvin,
Performance based incentives are a normal practice these days... I do not have much knowledge in this, so I'll share what I know about...
In my last service, I was to be given a performance linked incentive of 60,000 for a year. They included it in my CTC, in the place where we add employer's contribution to PF and all.... With a line added below that the incentives are linked to performance...
We were told that we all would be given targets and on completion of targets, they would map the achieved targets and then accordingly distribute the incentives in the ratios...
For example you are the highest achiever then our targets would be mapped according to you and whatever is the ratio, we'd get that % of our incentives....
However, seniors who've been handling Payroll and compensation should be in a better position to answer this query....
Stipend staff is usually covered under apprentice act, salaried employees are covered under standing order and other employment act.
Apprentices are not covered under ESIC/PF acts. Employees are covered under ESIC/PF acts...
Now it depends how have you brought the trainee on board.
If you are to cover him under standing orders and normal employment acts, irrespective you saying it stipend or salary, they'd be covered under PF acts.
If you bring them under apprentice act, irrespective of their title or you calling the pay as stipend or wages, they'd not be covered under PF acts...
Further more, mu notations -
Actually Apprentice is usually and technically a schooling person who is given a working experience with a real boss and works under real scenario.
The apprenticeship is now a days mostly referred to Internship which may vary for a duration of 2 months to 6 months depending on the project and area of study.
In this while, the internship or apprenticeship is said to have an enhance impact on the academic as well as professional study of the person.
There is this reply from a lawyer -
There is difference between trainee and Apprentice. Apprentice are engaged under the Apprentice Act where are trainees are appointed by the employers under their own rules and/or standing orders. Thus trainees are covered by EPF Act.
Source: Trainees Comes under EPF and ESIC Act
There is a discussion forum about apprenticeship and traineeship which you can refer to -
https://www.citehr.com/303170-what-d...-employee.html
Hope this helped you...
Seniors pls correct if I happen to be wrong somewhere...
Thanks.
From India, Mumbai
Performance based incentives are a normal practice these days... I do not have much knowledge in this, so I'll share what I know about...
In my last service, I was to be given a performance linked incentive of 60,000 for a year. They included it in my CTC, in the place where we add employer's contribution to PF and all.... With a line added below that the incentives are linked to performance...
We were told that we all would be given targets and on completion of targets, they would map the achieved targets and then accordingly distribute the incentives in the ratios...
For example you are the highest achiever then our targets would be mapped according to you and whatever is the ratio, we'd get that % of our incentives....
However, seniors who've been handling Payroll and compensation should be in a better position to answer this query....
Stipend staff is usually covered under apprentice act, salaried employees are covered under standing order and other employment act.
Apprentices are not covered under ESIC/PF acts. Employees are covered under ESIC/PF acts...
Now it depends how have you brought the trainee on board.
If you are to cover him under standing orders and normal employment acts, irrespective you saying it stipend or salary, they'd be covered under PF acts.
If you bring them under apprentice act, irrespective of their title or you calling the pay as stipend or wages, they'd not be covered under PF acts...
Further more, mu notations -
Actually Apprentice is usually and technically a schooling person who is given a working experience with a real boss and works under real scenario.
The apprenticeship is now a days mostly referred to Internship which may vary for a duration of 2 months to 6 months depending on the project and area of study.
In this while, the internship or apprenticeship is said to have an enhance impact on the academic as well as professional study of the person.
There is this reply from a lawyer -
There is difference between trainee and Apprentice. Apprentice are engaged under the Apprentice Act where are trainees are appointed by the employers under their own rules and/or standing orders. Thus trainees are covered by EPF Act.
Source: Trainees Comes under EPF and ESIC Act
There is a discussion forum about apprenticeship and traineeship which you can refer to -
https://www.citehr.com/303170-what-d...-employee.html
Hope this helped you...
Seniors pls correct if I happen to be wrong somewhere...
Thanks.
From India, Mumbai
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