Here Are The Major Details About Salary Structure Every Employee Should Know
In India, the employees have little or no knowledge about the salary structure even though it is one of the most important things to learn before you join a company. So, here in this article, various components related to the salary structure will be explained which will help you will understand how you can use it efficiently.
Basic Salary and Dearness allowance
The basic salary is considered as the core of salary structure and plays an important role as various components like Provident Fund, Gratuity, and ESIC are dependent on it. The basic salary includes 40 to 45 percent of total salary package of an employee which is also called CTC package.
Whereas, the Dearness Allowance is given to the employees in order to reduce the burden of inflation. The amount of Dearness allowance is about 5 percent of the basic salary and this allowance also has an effect on PF, ESIC etc. If both the allowances are high in amount then it increases the tax liability of an employee and if the allowances are low then the employee may not be able to reach minimum wage norms set by the respective state government.
House Rent Allowance
If an employee is living in rented accommodations, then this allowance is provided. The amount of House Rent Allowance cannot be more than 50 percent of the basic salary of an employee in metropolitan areas and no more than 40 percent in non-metro areas. According to the location of your workplace, the House Rent Allowance is decided.
Leave travel allowance
This allowance is provided to the employees for their travel within the country. The Leave travel allowance has tax benefits linked with it. An employee can claim tax benefit for the fare expenses. But, there are some terms and conditions associated with it like only fare expenses can be claimed but food and staying expenses are not covered in this allowance.
Child Education Allowance
This allowance includes the tuition fees of employee’s children but the amount is not more than 2,400 rupees a year for an employee. If you want the benefit of this allowance then the employee has to give the information related to the number of children to avail the tax benefit on Education Allowance.
In a company, an employee is also eligible for the Provident Fund. In this fund, both the employer and employee have to contribute the same amount of money. It is mandatory for the company to be the part of the provident fund if the number of employees is more than 20. The employee has to contribute either 12 percent of basic allowance or 12 percent of the dearness allowance.
The employees present in the states of Karnataka, West Bengal, Maharashtra, Andhra Pradesh, Kerala, Goa, Delhi, Punjab, and Haryana & Madhya Pradesh have to contribute in a fund called as Labour Welfare Fund for the benefit of the labour class.