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.