Salary

What is Salary Structure?

Salary Structure is the structure or details of the salary being offered in

terms of the breakup of the various components that constitute the
compensation. Salary Structure is the set of parameters that define the salary.
Two people can have the same salary but still get different amounts of money
every month this would happen when the salary structure is different.

Salary structure is a very important information which determines the in

hand pay, gross salary, net salary, allowances etc. All these variables are paid
to the employee as a part of his/her compensation and benefits. If an employee
does not have details of the components, he/she cannot calculate the in hand
as well as savings parts like Employee Provident Fund.

Salary Components
The usual components of salary structure include:

1. Basic Salary: It is the taxable base income and generally not more than
40% of CTC. Basic salary forms the basis of salary structure many a times.
Most of the components may be defined as percentage of basic salary.

2. House Rent Allowance: The HRA constitutes 40 to 50% of the basic salary.

3. Special Allowances: Makes up for the remainder part of the salary, mostly
smaller than the basic salary and completely taxable.

4. Leave Travel Allowance: The non- taxable amount paid by the employer to

the employee for vacation/trips with family within India.
5. Gratuity: It is basically a lump sum amount paid by the employer when the
employee resigns from the organization or retires.

6. Provident Fund:Fund collected during emergency or old age. 12% of the

basic salary is automatically deducted and goes to the employee provident
fund.

7. Medical Allowance: The employer pays the employee for the medical
expenditures incurred. It is tax free up to Rs.15,000.

8. Bonus: Taxable part of the CTC,usually a once a year lump sum amount,
given to the employee based on the individual’s as well as the organizational
performance for the year.

9. Employee Stock Options: ESOPS are Free/discounted shares given by the

company to the employees. Done to primarily increase employee retention.

These are just few of the components which can be included in a typical salary
structure but it may vary from company to company.

There are certain rules that it is mandatory to give PF if the company is greater
than n number of employees in size. A smaller company may give some other
components and a bigger company may give a different set of components in
their salary.
Salary Structure Format: Sample