Salary Structure - Equitable compensation theory model?

Hi, I have to design and develop a salary structure for 5 to 6 positions for my project. It should contain the basic components of a salary structure based on the Equitable Compensation Theory model. Can somebody help me?

Regards,
Leela

Hi B Neelavathi,

The salary structure varies from company to company based on their C&B policies. Some of the common pay heads used are:

1) Basic - 35% - 50% of Gross

2) HRA - 40% of Basic for Non-metro & 50% of Basic for Metro

3) Con - Max Rs. 800/PM, which is a maximum of Rs. 9600 PA

4) Medical Reim - Max Rs. 1250/PM, which can be a maximum of Rs. 15000 PA

5) Spl Allow - The balance of Gross will be provided as Special Allowance

Statutory:

1) PF

Employee Contribution - 12% of Basic

Employer Contribution - 13.61% of Basic

2) ESI - Applicable to employees whose Gross Salary is less than or equal to Rs. 10000

Employee Contribution - 1.75% of Gross

Employer Contribution - 4.75% of Gross

PT - It varies from state to state

Net Salary = Gross - PF (Employee Cont) - ESI (Employee Cont) - PT

CTC = Gross + PF (Employer Cont) - ESI (Employer Cont)

Gratuity = Basic * 15/26 - It is payable to the employee who completes 5 years of service in the organization. It can be shown as a part of CTC.

If employees come under a high salary, then you can further split up the amount in Special Allowance for:

1) Food coupons

2) Car Hire

3) Petrol and Maintenance for Car

4) LTA

FBT is applicable apart from LTA.

The Variable Pay % also differs from company to company based on the C&B Policy. In my previous organization, it is 12.5% of the CTC for all departments except Sales. For sales, it will be 15%.

Regards,

M V Muthu Krishnan

99622 98084

Hi Muthu,

This is Lakshmi, and I am joining an IT firm that is opening its branch in Bangalore. In the US, it's already established. I have to go ahead and design the salary structure for the employees in such a way that tax deductions are minimal. I am new to the Compensation & Benefits (C&B) topic. Can you help me with the components to focus on? Also, is there a standard Excel salary breakup sheet available? I would be really thankful if you could assist me in designing the structure.

Regards,
Lakshmi
lakshmibright@gmail.com

I hope my previous post did not satisfy your question. Which is your current industry? Have you already done the grading of employees? Are you ready with all department organization charts? These are the basic elements in C&B.

Hi Lakshmi,

Sorry for the delay in replying. Have you received the answer you were looking for, or do you still need some assistance? If you could provide me with details on the components you are utilizing in your pay structure, I can offer guidance on tax deductions.

Regards,
M V Muthu Krishnan
99622 98084

Hi Muthu,

Not a problem. Our company is taking the help of VnV Associates for designing the CTC break-up structure. We have the following slabs: 0-5 lacs; 5-10 lacs; 10-15 lacs; and 15+ lacs.

As we started the operations only in the month of February, we have considered them as consultants and from April 1st, shall consider them as permanent employees. Kindly give me an idea of what different perquisites can be provided to the employees.

Thanks,
Lakshmi
lakshmibright@gmail.com

In addition to Muthu's breakup of salary for the highly salaried individuals, the following components can be considered:

1. Children's Education Allowance - Rs. 200/- per month (Rs. 100 per child)
2. Children's Hostel Allowance - Rs. 300/- per month per child
3. Club Allowance
4. Superannuation - 15% of basic salary

The above components are tax-exempted.

Dear All,

Please note that the ceiling for deducting ESI is raised to Rs. 15,000 by the Government of India with effect from July 2010. Kindly deduct accordingly and update the systems.

Hi Muthkrish Sir,

I was confused about whether PF is equal for employers and employees, i.e., 12%. However, while calculating the salary structure, you mentioned:

Statutory
1) PF
Employee Contribution - 12% on Basic
Employer Contribution - 13.61% on basic
How is this 13.61%? 12% is understandable, but what about the extra 1.61%?

Thank you.