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
- 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
- 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 firstname.lastname@example.org | 02240365432.
Follow the below links for other payroll related guidelines.
Guide to payroll processing – https://mypayrollbuddy.com/list-laundry-items-check-accurate-payroll-processing/