Salary Breakup-clear Explanation Please - XLS Download

Hi All,

I am working in the garment retail industry. I am a new employee on the floor and I need your help in understanding the salary breakdown.

I have a problem in understanding the salary breakdown. Do we have any percentage for items such as DA, HRA, CA, special allowance, conveyance, and other allowances? Is it calculated by percentage or by a specific amount?

What are the components of the salary breakdown? Does the breakdown vary from management to management? Please help me with this.

Thanks and Regards,
Sriram V B

Hi Sriram,

Greetings,

The basic amount is to be calculated at 40% of the Cost to Company (CTC).

House Rent Allowance (HRA) is to be calculated at 40% of the basic salary.

Medical Allowance is fixed at $1250.

Special Allowance will be the remaining balance.

Additionally, you have to deduct PF at 12% of the basic salary and Professional Tax as applicable.

This is the basic information.

Cheers,

Geetanjali

Hi Geetanjali,

Greetings,

Firstly, I would like to thank you for your reply.

My company calculates in a different manner; I don't think we calculate on any percentages.

I think the break-up differs from management to management. There are lots of differences in what percentage you have given to me.

I have some other questions. Is the below break-up as per Tamil Nadu:
(1) Basic Pay - 2500 and above, HRA will be taken into account
(2) Basic Pay - < 2500, DA will be taken into account.
(3) Conveyance, special allowances, and other allowances, etc., come below those above as per the percentage (my question).
(4) Deductions PF, ESI, PT as per the law.
(5) Mediclaim, max is 1250, minimum any amount. (deduction for months in a year)
(6) Holiday Allowances as per the holidays allowed in FORM V

Does the percentage differ from company to company or is it the same as per the government law? Am I correct, or are there any mistakes in the above? Please correct me if I have gone wrong in any place.

Thanks and Regards,
Sriram V B

Hi everyone,

Can you please help me? I am working in a staffing company and looking for a salary structure where I can focus more on incentive-based pay. Can you please assist me with this?

Thanks

Can anyone tell me whether both DA & HRA can be incorporated in the salary structure? If yes, then what is the maximum percentage allowed? If no, then please let me know the exact way to bifurcate both.

Regards,
Sangeeta

Hi Sriram,

As you requested, please find below the salary breakup:
Basic: 30% - 50% of CTC (Cost to Company)
HRA:
- 50% of Basic for Major Cities (i.e., Chennai, Delhi, Mumbai, & Kolkata)
- 40% of Basic for all other locations
Dearness Allowances (D.A): Most companies will not provide this, as it is government-allocated and fully taxable.
Transport Allowance: Up to Rs. 800 per month is non-taxable.
Telephone Allowance: Fully taxable
Deputation Allowance: Fully taxable
Provident Fund: 12% of Basic
Gratuity: 4.8% of Basic (Employees who have worked in an organization for a minimum of 5 years are eligible for this)

Hope the above details clarify some of your doubts.

Best Regards,
Isaac Patturaja
9444637384

Dear Friends,

Might it be helpful to you all.

Please Note:

1.) For every cash component paid to an employee, the employer has to bear FBT cost.

2.) Any kind of reimbursement should be part of CTC.

3.) Some companies also include performance pay bonus as part of CTC.

For any details, you can email me.

Regards,
Nikhil Kumar

Hi Sriram,

First thing you should understand is that there is no fixed pattern of salary; it changes from company to company.

The illustration given by Geetanjali is one way of fixing up a salary structure.

One common way followed in organizations is:

Basic Pay: There is a scale for basic pay as per level/designation, say Rs.X
Dearness Allowance: Normally seen in the salary structure of Govt Organizations. It is calculated based on the Consumer Price Index
HRA: It depends on Basic Pay, varying from 20-50% of basic pay
CCA: Another component, rarely seen, depends on company policy
Conveyance/Transport Allowance: Varies, allowance up to Rs. 800 per month is tax-exempt
Medical: Normally Rs. 1250 per month, or some companies provide Rs. 15,000 yearly, which is tax-exempt. Reimbursement on proof is possible
Special Allowance: Sometimes used to match the CTC with a negotiated figure, adjusted if not possible due to restrictions like the basic pay limit for a given designation. It can be named under any allowance like Professional Support Allowance/Development Allowance, etc.

Deductions:
PF: 12% of basic
Gratuity: 4.81% of basic
Superannuation, etc.

So when you say:
(1) Basic Pay - 2500 and above, HRA will be taken into account
(2) Basic Pay - < 2500, DA will be taken into account.

It's entirely company policy, and you need to understand it from your company person.

Salary structure may change from Management to Management as the percentage of some allowances may change according to level. For example, if there is an allowance called Mobile Bill reimbursement, it may vary.

Renu

When you design a CTC structure that is incentive-based, some percentage of CTC is kept as a performance-based incentive. The percentage of this incentive increases as the level is increased.

- At entry level/junior level, the incentive is 10-15% of CTC
- Middle level: 20-30% of CTC
- Senior level: 20-45% of CTC
- For President/COO/CEO/MD level, the incentive can be as high as 50-60% of CTC

There can be different types of incentives:
- Individual performance
- Group Performance
- Company performance

Some formula may be worked out to decide the exact calculation.

Sangeeta

Both DA and HRA can be part of Salary as their functionality is different, and they are not interrelated. So refer to my earlier comments.

Calculation of DA

There will be something called the Base CPI taken at a reference point, and there will be the current average CPI at a given quarter.

DA is a percentage of Basic salary, and this percentage is calculated as:

DA% = % increase over the base CPI

For example:
Current Avg CPI is 3150
Base CPI is 1708
Then % increase is 84.4%

So DA will be 84.4% of basic pay.

Regards,

Sushil Patil

Thank you for the information, friends. I have a doubt. Is there any legislation regarding the salary breakup percentage other than the minimum wages? Please let me know.

Thank you,

Kumanan A

I am giving salary structure details as per my knowledge and industry practice.

1) Your basic is not less than the minimum basic fixed by the Government.
2) If there is a worker, then you have to pay DA with basic.
3) Generally, it depends on company policy, but the standard practice is to keep basic at 40-60 percent of CTC.
4) As per government rules, you have to pay a minimum HRA of 5% on basic and DA.
5) Other allowances can be fixed as per your requirements but not more than the basic for a good visual look. Generally, it is assumed that a higher basic means a good company.

Thanks,
Pankaj