Pointer for designing Indian payroll Compensation & Benefits

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In the book GOAL, the author asked his readers what is your goal, with lot of brainstorming discussion & thoughts. The answer was MONEY.

For every employee in an organisation, with challenging career & loyalty comes employee’s salary / payroll compensation & benefits that He / She deserves.

Payroll primarily is designed with 3 KEY components keeping in mind.

1. Salary of the employees
2. Payroll statutory compliances state wise
3. Employees salary taxation

Keeping the above 3 factors in mind, a guide to design employee’s payroll compensation & Benefits.

1. Min wages and Acts

  • State wise, statutory policy
  • Bonus act
  • Gratuity act – See here
  • PF rules & limits
  • ESIC rules & limits

2. Create a CTC structure

  • Basic – Min 50% should be allocated of the CTC
  • HRA should be 50% of basics for Metro and 40% for non-metro city
  • DA as per defined rates, review every 6 months
  • Tax benefits heads like
    • Conveyance
    • Medical
    • LTA
    • Education
  • Incentives
    • Variable pay should be part of the incentive, helps tracking achievement
    • Incentive can exceed the defined variable pay in the CTC
    • ESOP as applicable from company to company
    • To be paid quarterly to avoid ESIC applicability

3. Statutory computation rules

  • PF components
    • Basic + DA + Special allowance + any standard allowance is common across the organisation attracts PF deduction
    • Employees can opt for PF voluntary contribution
  • ESIC components
    • Total of the gross earning is applicable for ESIC computation
    • Washing allowance & similar are not consider for ESIC
    • Any payment done on monthly basis like incentive, statutory bonus & other attracts ESIC
  • PT & LWF
    • As per state acts
    • PT has slabs as per Gross earning for that month
    • LWF is as per nature of work
  • Bonus
    • Statutory bonus, typically paid during Diwali & festive season
    • Computed on min wages define state wise
    • Mandate for employees drawing less that defined basic salary, keep validating the rule for bonus payment every year

4. Tax planning

  • Food meal coupons, Gift vouchers as per exempted limit
  • Companies offer flexi basket for tax saving benefits to its employees like food coupons & education
  • Reimbursement on allowances like petrol, communication, internet

As I conclude in all my articles, that every company has its unique way to derive the best compensation & Benefits plan for their employees.

So please share your idea for a WIN-WIN employee – employer friendly Payroll compensation & Benefits scheme.

For all Payroll ideas kindly connect us on dhwani@opportune.in | 02240365432.

Follow the below links for other payroll related guidelines.

Guide to payroll processing – http://mypayrollbuddy.com/list-laundry-items-check-accurate-payroll-processing/

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