I have been surfing to get the exact point-wise components of the CTC structure which have FIXED & VARIABLE points included. Tax benefits need to be considered. What is the correct calculation for increments in the salary structure? I am waiting for clarity as there is a lot of confusion :)
From India, Delhi
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From India, Delhi
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Dear Member,
There can be many components in a CTC structure. It all depends on for whom you are drafting the structure. Every point can't be considered for all levels.
In the case of lower salary (up to 5 L), you need to frame the structure keeping in view the basic structure (statutory wages, bonus, PF-ESI, etc.).
For medium salary (5L to 10 L), you need to frame the structure keeping in view the basic structure and enhanced tax exemptions (LTA, Telephone, newspaper, etc., reimbursement).
For high salary (10 L and above), you need to frame the structure keeping in view the structure as per corporate norms and enhanced tax exemptions (LTA, Telephone, newspaper, vehicle fuel, vehicle maintenance, etc., reimbursement).
I have updated the most required components in the attached format. Hope you will find it as per the requirement. Learned members can shed more light on the matter.
From India, Delhi
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238There can be many components in a CTC structure. It all depends on for whom you are drafting the structure. Every point can't be considered for all levels.
In the case of lower salary (up to 5 L), you need to frame the structure keeping in view the basic structure (statutory wages, bonus, PF-ESI, etc.).
For medium salary (5L to 10 L), you need to frame the structure keeping in view the basic structure and enhanced tax exemptions (LTA, Telephone, newspaper, etc., reimbursement).
For high salary (10 L and above), you need to frame the structure keeping in view the structure as per corporate norms and enhanced tax exemptions (LTA, Telephone, newspaper, vehicle fuel, vehicle maintenance, etc., reimbursement).
I have updated the most required components in the attached format. Hope you will find it as per the requirement. Learned members can shed more light on the matter.
From India, Delhi
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Dear Member, Total PF contribution is 25.15% but in CTC letter we add only 12%+12%,Please clarify.
From India, Chennai
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From India, Chennai
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Good evening and thank you, Mr. Singh, for your prompt reply. It would be really nice if I could receive some valuable inputs on my queries mentioned below.
FYI, I belong to a small proprietorship organization of 14 people (we do not have any HR person). Only 1 person is in the 5 lakh CTC scale and 1 person in the 7 lakh CTC scale. The rest are between the 2.5-3.5 lakh scale. We have had increments this year for some in both categories.
As per the Delhi Minimum Wage Act 2018, we also follow PF and ESI. What should be the basic and other components for a person earning 20k, 25k, 28k per month if the increments are decided on the CTC figure? If the CTC is 26000, then the basic calculation of 40% is 10400. What should be the rest of the components to fill the remaining amount? Also, if a person is earning 45000, then the basic would be 18000. In this case, what would be the breakup?
Also, I cannot open the attachment. Please be kind enough to mention how I can do it. Thank you and eagerly waiting for a response to my query!
From India, Delhi
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FYI, I belong to a small proprietorship organization of 14 people (we do not have any HR person). Only 1 person is in the 5 lakh CTC scale and 1 person in the 7 lakh CTC scale. The rest are between the 2.5-3.5 lakh scale. We have had increments this year for some in both categories.
As per the Delhi Minimum Wage Act 2018, we also follow PF and ESI. What should be the basic and other components for a person earning 20k, 25k, 28k per month if the increments are decided on the CTC figure? If the CTC is 26000, then the basic calculation of 40% is 10400. What should be the rest of the components to fill the remaining amount? Also, if a person is earning 45000, then the basic would be 18000. In this case, what would be the breakup?
Also, I cannot open the attachment. Please be kind enough to mention how I can do it. Thank you and eagerly waiting for a response to my query!
From India, Delhi
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Dear member,
First of all, pls be noted the CTC structure depends upon many factors (company budget, future plans, nature of employees engaged, no. of employees, organisation structure etc). As you have mentioned yours is a small proprietorship organization of 14 people. Pls note my clarifications on your queries:-
In r/o employees of 5L-7L, you can consider the basic salary on basis of 40%-50% criteria. The other component could be HRA, 50% of basic (to avail tax benefits), special allowance, conveyance allowance etc. (provided in the attachment as well).
Pls find attached the notification of Delhi Govt in which Minimum Wages of different categories given.
As per Delhi Min. Wage Act Apr. 2018- we also follow pf & esi.-what should be the basic and other components for a person earning 20k, 25k, 28k per month if the increments are decided on CTC figure?? =THE BASIC MUST BE AS PER MW ACT, REST COMPONENTS COULD BE AS PER MY CTC ATTACHMENT.
If the ctc is 26000 then the basic calculation of 40% is 10400. what should be the rest of components to fill the remaining amount? = THIS IS INCORRECT WAY. FIRST CHECK WITH THE NOTIFICATION, THAN DEFINE THE BASIC.
The other component could be HRA (50% of basic) to avail tax benefits, special allowance, conveyance allowance etc. (provided in the attachment as well).
Also if a person is earning 45000, then basic would be 18000. In this case what would be the break-up? = THE BASIC FOR GRADUATE AND ABOVE IS RS. 18332/-. SO CHECK THE BASIC.
If you are unable to open the file, this may be due to you are using older version of excel. I am attaching as PDF, hope it will help you.
I have elaborate the matter in much detail, hope this will clarify you all the points. The attachment alone will not serve the purpose, you have to do working as per your requirement.
Last but not the least, I would advise you to take any consultant’s help. So that all time you can comply as per the govt. rules and regulations.
From India, Delhi
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First of all, pls be noted the CTC structure depends upon many factors (company budget, future plans, nature of employees engaged, no. of employees, organisation structure etc). As you have mentioned yours is a small proprietorship organization of 14 people. Pls note my clarifications on your queries:-
In r/o employees of 5L-7L, you can consider the basic salary on basis of 40%-50% criteria. The other component could be HRA, 50% of basic (to avail tax benefits), special allowance, conveyance allowance etc. (provided in the attachment as well).
Pls find attached the notification of Delhi Govt in which Minimum Wages of different categories given.
As per Delhi Min. Wage Act Apr. 2018- we also follow pf & esi.-what should be the basic and other components for a person earning 20k, 25k, 28k per month if the increments are decided on CTC figure?? =THE BASIC MUST BE AS PER MW ACT, REST COMPONENTS COULD BE AS PER MY CTC ATTACHMENT.
If the ctc is 26000 then the basic calculation of 40% is 10400. what should be the rest of components to fill the remaining amount? = THIS IS INCORRECT WAY. FIRST CHECK WITH THE NOTIFICATION, THAN DEFINE THE BASIC.
The other component could be HRA (50% of basic) to avail tax benefits, special allowance, conveyance allowance etc. (provided in the attachment as well).
Also if a person is earning 45000, then basic would be 18000. In this case what would be the break-up? = THE BASIC FOR GRADUATE AND ABOVE IS RS. 18332/-. SO CHECK THE BASIC.
If you are unable to open the file, this may be due to you are using older version of excel. I am attaching as PDF, hope it will help you.
I have elaborate the matter in much detail, hope this will clarify you all the points. The attachment alone will not serve the purpose, you have to do working as per your requirement.
Last but not the least, I would advise you to take any consultant’s help. So that all time you can comply as per the govt. rules and regulations.
From India, Delhi
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Dear Mr. Singh,
Thank you for the information. In one of the attached sheets, the basic salary is less by 20k, which is again very confusing. Kindly advise on the right practice for increment in a small company like ours. We do wish to have a consultant, but right now it is not possible for us.
I have joined the Citehr family because it is full of experienced, genuine people who can guide well and in turn share their knowledge. Thank you again for your guidance and I am eagerly waiting for my answers!
From India, Delhi
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Thank you for the information. In one of the attached sheets, the basic salary is less by 20k, which is again very confusing. Kindly advise on the right practice for increment in a small company like ours. We do wish to have a consultant, but right now it is not possible for us.
I have joined the Citehr family because it is full of experienced, genuine people who can guide well and in turn share their knowledge. Thank you again for your guidance and I am eagerly waiting for my answers!
From India, Delhi
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Dear Member,
I think you are totally new to framing the CTC or even fresher in HR. I don't think there should be any confusion. The basic is less than 20K because it is framed for lower-scale employees (being CTC 20k/pm). You can increase (modify) the basic and other components as per your requirement.
You are facing difficulty because you are unable to open the file. I am attaching the file again; if you are able to download it, then all your queries will be resolved. If you have any specific queries, please share them. First, put some effort into understanding the structure and the basic principles of defining the salary structure. Then start working on your own, and you will definitely find the correct way.
However, framing the right practice of doing increments mainly depends on management's overview regarding the budget, future plans, company profitability, etc. First, draft a proper salary structure. Then, while doing the increment, ask your management (which generally is the owner in a small company) what percentage should be given to the employees. Accordingly, you can increase the Basic, HRA, and other components.
Also, note that you don't need to consider all components for every employee. Select some basic points (Basic salary, HRA, Conveyance, etc.) for every employee and pick the other heads as per the employee's designation and CTC.
I hope I have clarified it to you. Fellow members can shed more light on the matter.
From India, Delhi
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I think you are totally new to framing the CTC or even fresher in HR. I don't think there should be any confusion. The basic is less than 20K because it is framed for lower-scale employees (being CTC 20k/pm). You can increase (modify) the basic and other components as per your requirement.
You are facing difficulty because you are unable to open the file. I am attaching the file again; if you are able to download it, then all your queries will be resolved. If you have any specific queries, please share them. First, put some effort into understanding the structure and the basic principles of defining the salary structure. Then start working on your own, and you will definitely find the correct way.
However, framing the right practice of doing increments mainly depends on management's overview regarding the budget, future plans, company profitability, etc. First, draft a proper salary structure. Then, while doing the increment, ask your management (which generally is the owner in a small company) what percentage should be given to the employees. Accordingly, you can increase the Basic, HRA, and other components.
Also, note that you don't need to consider all components for every employee. Select some basic points (Basic salary, HRA, Conveyance, etc.) for every employee and pick the other heads as per the employee's designation and CTC.
I hope I have clarified it to you. Fellow members can shed more light on the matter.
From India, Delhi
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Dear Sir,
Thank you for your prompt answer. You have guessed it right; I am very new to this subject, and my concerns arise because I am the co-proprietor of the company. We believe in doing the right thing and the right process. So before initializing, we just wanted to ensure that our calculations are correct. Below, I have shared an example of a store assistant who is unskilled and has been with the company for 5 months under the training period. Please shed some light on the format. Thank you in advance!
Earnings Amount Deductions Amount Basic 13350 TDS Payable - Salary (192B) 0 H.R.A 0 Employee's P.F Contribution @ 12% 1602 Children Education Allowance 0 Employee's E.S.I Contribution @ 1.75% 234 Transport Allowance 0 Medical Reimbursement 0 Leave Travel Allowance 0 Helper 0 Uniform Allowance 0 Uniform Upkeep Allowance 0 Compensatory Allowance 0 Salary (A) 13350 Total Deductions 1836 Net Monthly Salary 11514 Gross Salary 13350 Cost To Company Per Month Per Annum PF: Employer Contribution & Charges 1756 21066 ESIC: Employee Contribution 634 7610 Gratuity 642 7702 Medical Insurance 0 0 Accidental Insurance 34 405 Leave Encashment 556 6675 15 PL/yr Total (C) 3621 22391 CTC 16971 203658
Please let me know if you need any further information or clarification. Thank you.
From India, Delhi
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Thank you for your prompt answer. You have guessed it right; I am very new to this subject, and my concerns arise because I am the co-proprietor of the company. We believe in doing the right thing and the right process. So before initializing, we just wanted to ensure that our calculations are correct. Below, I have shared an example of a store assistant who is unskilled and has been with the company for 5 months under the training period. Please shed some light on the format. Thank you in advance!
Earnings Amount Deductions Amount Basic 13350 TDS Payable - Salary (192B) 0 H.R.A 0 Employee's P.F Contribution @ 12% 1602 Children Education Allowance 0 Employee's E.S.I Contribution @ 1.75% 234 Transport Allowance 0 Medical Reimbursement 0 Leave Travel Allowance 0 Helper 0 Uniform Allowance 0 Uniform Upkeep Allowance 0 Compensatory Allowance 0 Salary (A) 13350 Total Deductions 1836 Net Monthly Salary 11514 Gross Salary 13350 Cost To Company Per Month Per Annum PF: Employer Contribution & Charges 1756 21066 ESIC: Employee Contribution 634 7610 Gratuity 642 7702 Medical Insurance 0 0 Accidental Insurance 34 405 Leave Encashment 556 6675 15 PL/yr Total (C) 3621 22391 CTC 16971 203658
Please let me know if you need any further information or clarification. Thank you.
From India, Delhi
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Dear Member,
First of all sorry for late reply, today only I have gone through your comments. I am delight the way you accept that things are new to you and understand your curiosity for gathering the knowledge (being co-proprietor). However, I have summarize the detail in the excel sheet duly matching with your calculations. Hope you will now understand easily. But still this required some updations/corrections. Pls note my observations:-
1. It seems you pay the Minimum Wages only as a basic and no allowance. As per Act it is permisible, but wef 01st Apr’18 the Minimum Wages for unskilled person is Rs. 13896/-. Rs. 13350/- is old rate which applicable last year.
2. Since you are paying only the Minimum Wages, hence note it is different for different categories as per below detail:- Semi-Skilled- Rs. 15296, Skilled- Rs. 16858 and so on. So I will advice to consider appropriate wages for each categoy.
3. You have considered Employer PF Contribution @ 13.15%, which is incorrect way. Ideally you should show @ 12% only. The PF admin charges (1.15%, which has further reduced to 1.00% wef 01st June’18) is employer’s liability towards the govt. Employee doesn’t get the amt., hence it is of no logic to show the govt. payable charges in employee’s CTC.
4. The most important part is that you have not shown the “Statutory Bonus”. Since you are 14 persons, hence Payment of Bonus Act, 1965 is applicable to you. You are bound to pay the Bonus as per the Act.
5. I have inserted one more sheet duly showing the increment @ 10%. The corrections also done and components have been changed accordingly. But in such case also note the Basic Wages should not be less than as per the Minimum Wages Act. (as you are following in your above mentioned example). Paying the Minimum Wages is statutory liability, however above that you can pay as per company policy.
Hope now I am cleared to your points. Fellow members can put more light on the matter.
From India, Delhi
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First of all sorry for late reply, today only I have gone through your comments. I am delight the way you accept that things are new to you and understand your curiosity for gathering the knowledge (being co-proprietor). However, I have summarize the detail in the excel sheet duly matching with your calculations. Hope you will now understand easily. But still this required some updations/corrections. Pls note my observations:-
1. It seems you pay the Minimum Wages only as a basic and no allowance. As per Act it is permisible, but wef 01st Apr’18 the Minimum Wages for unskilled person is Rs. 13896/-. Rs. 13350/- is old rate which applicable last year.
2. Since you are paying only the Minimum Wages, hence note it is different for different categories as per below detail:- Semi-Skilled- Rs. 15296, Skilled- Rs. 16858 and so on. So I will advice to consider appropriate wages for each categoy.
3. You have considered Employer PF Contribution @ 13.15%, which is incorrect way. Ideally you should show @ 12% only. The PF admin charges (1.15%, which has further reduced to 1.00% wef 01st June’18) is employer’s liability towards the govt. Employee doesn’t get the amt., hence it is of no logic to show the govt. payable charges in employee’s CTC.
4. The most important part is that you have not shown the “Statutory Bonus”. Since you are 14 persons, hence Payment of Bonus Act, 1965 is applicable to you. You are bound to pay the Bonus as per the Act.
5. I have inserted one more sheet duly showing the increment @ 10%. The corrections also done and components have been changed accordingly. But in such case also note the Basic Wages should not be less than as per the Minimum Wages Act. (as you are following in your above mentioned example). Paying the Minimum Wages is statutory liability, however above that you can pay as per company policy.
Hope now I am cleared to your points. Fellow members can put more light on the matter.
From India, Delhi
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Dear Sir,
Thank you for the email. You need not be sorry, sir. I completely appreciate your kind response and information. Thank you once again. My concern is whether doing an increment on the CTC factor is a more appropriate way or if increasing the Basic salary is a better approach. Secondly, is a bonus a variable component every year, or is it a compulsion at 8.33% of Basic? Please clarify. Can I take my staff for a holiday and spend more instead of giving them the entitled bonus amount?
Thank you and have a good day, Sir.
Regards,
Reena
From India, Delhi
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Thank you for the email. You need not be sorry, sir. I completely appreciate your kind response and information. Thank you once again. My concern is whether doing an increment on the CTC factor is a more appropriate way or if increasing the Basic salary is a better approach. Secondly, is a bonus a variable component every year, or is it a compulsion at 8.33% of Basic? Please clarify. Can I take my staff for a holiday and spend more instead of giving them the entitled bonus amount?
Thank you and have a good day, Sir.
Regards,
Reena
From India, Delhi
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