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.