Salary Structure

Salary structure refers to the breakup of different components of the net pay that an employee gets in hand. Various parameters define a salary structure in the Indian Payroll process.

A standard structure would typically involve the following components:

• Basic Salary: the basic pay to the employee comprising 35%-50% of the net pay.
• Allowances: Typically may be divided as under:
• • Dearness allowance
  • House rent allowance
  • Conveyance allowance
  • Leave travel allowance
  • Medical allowance
  • Business entertainment allowance
  • Books and periodical allowance
  • Children’s fee allowance
• Gratuity: A lump sum benefit given to retiring employees. It is calculated based on the number of years of service for those employees who have completed a minimum of 5 years. Most establishments with 10 or more employees fall under the act.
• Employee Provident Fund: A fund where both employer and employee contribute each month. It’s a kind of saving scheme for the employee and withdrawals can be made a month after retirement or termination of service.
• Perquisites: Also called fringe benefits are non-cash benefits given to employees based on their official position. It may include a car for personal use, rent-free accommodation, payment for personal accident policy, etc. as decided in the employment agreement.
• ESIC (Employees State Insurance Corporation) : A company having 10 (20 in the case of Maharashtra and Chandigarh) or more employees is bound to register its employees for the ESIC scheme.  Contribution by an employer is 4.75% of salary and by employee 1.75% of salary.