compensation rules and design guidelines

7/21/2019 Compensation Rules and Design Guidelines

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COMPENSATION RULES AND DESIGN GUIDELINES

Monthly Components Guidelines Amounts (per month

Basic As per Bombay Chamber of Commerce guidelinesMinimum Basic figure for skilled, semi skilled and un

skilled employees should be minimum of Rs.3550(nskilled!, 3"50(#emi$#killed! and 3%50&$(#killed!.'oe)er *o be on safer side, do no* keep Basic figureless *han Rs.3%50&$ p.m.

In!ome T"# $ene%it& +-

Rs.3%50&$ (minimum!maimum no limi*..

'ouse Ren* Alloance('RA!

Maimum 50/ basic (Me*ro ci*ies! 0/ basic (nonme*ro ci*ies!.

In!ome T"# $ene%it&1cess of Ac*ual ren* paid o)er 20/ of Basic salary RMaimum 'RA alloed (50/ or "0/ of basic! R

Ac*ual Ren* 4aid – whichever is lower is Exemptfrom Tax.

For example.$"si! Rs'))))*+,RA Rs'-))))*+A!tu"l Rent Rs'.)))*+E#!ess o% "!tu"l rent p"id o/er -)0 o% $"si!(-)0#)))) 1 .))) Rs'2)))'ence ma eemp*ion alloed is loes* i.e. Rs."000&$subec* *o Ren* Receip*s of Rs."000&$ only

Maimum alloed 50/Basic (Me*ro Ci*ies!R 0/ Basic (+onMe*ro Ci*ies!

6ranspor* Alloance #upposed *o be con)eyance alloance mean* for*ranspor*a*ion be*een office and residence only.

In!ome T"# $ene%it&1emp* maimum up *o Rs.700&$ per mon*h. +o proofre8uired.

Rs.700&$ (ma!

Children9s educa*ionalloance

In!ome T"# $ene%it&Rs.200 per child subec* *o ma : children. 'encemaimum Rs.:00&$ is eemp*

Rs.:00&$ (ma!

4er8uisi*e Alloance Balancing figure ; af*er choosing all *he abo)ecomponen*s i*h respec* *o *heir maimum limi*sabsorbed, remaining amoun* can be named as #pecial

Alloance. * is fully *aable.

Balancing <igure

MedicalReimbursemen*s

Can be gi)en agains* bills or i*hou* bills does no*ma**er. #ome companies gi)e i* mon*hly, some8uar*erly, half yearly or yearly also. #ome companiesgi)e i* only agains* medical bills, some do no* ask forbills, ra*her bills are only demanded for <inal 6aCompu*a*ion a* *he end of *he year. +o *humb ruleabou* i*. 4referred *o pay mon*hly, i*hou* bills and askbills as per your ish, 8uar*erly, half yearly or a* *he end

of *he year. =o no* choose *o gi)e i* agains* bills only,*here is no rule for *he same>* only makes salaryprocessing a cumbersome process.In!ome T"# $ene%it&Maimum Rs.2:50&$ p.m. (Rs.25000 p.a.! is eemp*only if riginal Bills are pro)ided.

Rs.2:50&$ (ma!

<ood Coupons +on cash componen*, eemp* up *o Rs.2000&$ p.m. Rs.2000&$ (ma!



RETIRALS GUIDELINES Amount (per month

4ro)iden* <und 1mployer9s con*ribu*ion (*his is gi)en *o R4<C direc*ly.'oe)er employee9s con*ribu*ion is deduc*ed from hisMon*hly salary abo)e and sen* *o R4<C. 'ence *o*aldeduc*ion orks ou* *o be 2:?2: @ :/ of Basic.

In!ome T"# $ene%it&1mployee9s con*ribu*ion of 2:/ is eligible for =educ*ionfrom 6aable income. * can be *rea*ed as eemp*in)es*men*.

2:/ of Basic

ra*ui*y * is an annual componen* bu* since i* is re*rial benefi*, i*is included here.

25 days mon*hly basicper year.

ANNUALCOMPONENTS

GUIDELINES AMOUNT (per ye"r

-ea)e 6ra)el Alloance &Concession

ourney i*hin ndia primarily by Rail ; :nd A&c class foremployee and his immedia*e family (spouse, children,paren*s, siblings!. here rail *ranspor* is no* a)ailable,e8ui)alen* 4ublic 6ranspor* like Bus is also alloede8ui)alen* *o maimum :nd AC Rail fair only.

Air *ranspor* D class is alloed only *o Cen*ralo)ernmen* employees.

Can be paid any *ime in *he year in par* or in fullhene)er *he employee claims i*. 'oe)er employeemus* ha)e proof of lea)es *aken for *ra)el purpose andshould be aay from office for a* leas* : days in a year.

In!ome T"# $ene%it&1emp*ion ill be on Ac*ual epenses only.1emp*ion is alloed only for *o such ourneys in *heblock of years s*ar*ing from 2E7" ; 7E onards.

+o -imi* as such>

if* Fouchers #ame on *he lines of food coupons, *hese couponcompanies like #odeho 4ass also pro)ide a**rac*i)e

if* Fouchers, hich can be gi)en on =iali <es*i)alccasion. <or unior employees amoun* can be loer,for senior ca*egories, amoun* can be higher up *oRs.5000 or so.

In!ome T"# $ene%it&4lease check i*h 6a consul*an*s ho much is eemp*from *aable income. As per my knoledge, i* is no*more *han Rs.5000&$

Be*een Rs.3000&$ *oRs.5000&$

3or Senior M"n"4ement Employees onlyPER5UISITES GUIDELINES AMOUNT (Per 6e"r

Ren* <ree Accommoda*ion

ned or Managed by*he 1mployer $(ncludes <la*, 'o*el,<armhouse, ues*'ouse, Cara)an, e*c.!

In!ome T"# e%%e!t&6aable per8uisi*e ; Falue of ren* free accommoda*ion

considered *aable for *he period of house occupied isei*her of *he folloingG<or 4ri)a*e #ec*or 1mployees20/ of #alary (for me*ro ci*ies! or (%.5/ for non me*roci*ies! ? 1cess of <air Ren* Falue (marke* ren*! o)er"0/ of salary (i.e. Marke* Ren* ; "0/ of salary! @ 6o*al*aable )alue of ren*$free acco.<or 4# and #emi$o)*. employees20/ of #alary (for me*ro ci*ies! or (%.5/ for non me*roci*ies! R <air Ren* Falue hiche)er is loer is



6aable.6he *erm H#alary9 ill include *o*al of *he folloingGBasic, All Alloances I Reimbursemen*s (ecludingMed. Reimb.!, Bonus recei)ed, any commission, feese*c.<air Ren* ; Marke* Ren* or Municipal Falua*ion of Ren*,hiche)er is 'igher.

Car(<or personal!ned by *he1mployer

In!ome T"# e%%e!t&6aable Falue ill include *he folloing ;

Ac*ual Running I Main*enance ependi*ure incurred by*he employer ? =ri)er9s #alary ? =eprecia*ion ; anyamoun* charged by employer *o employee for personaluse of *he car.

1mployee #*ockp*ion 4lan

1mployee eercises his op*ion by buying ou* *he sharesduring *he eercise period hoe)er *a liabili*y occursonly hen an employee sells *he shares on *he )alue of sale made under *he Capi*al ains head of income.

OT,ER $ENE3ITS OUT O3 CTC STRUCTURE $UT STILL 3ORM PART O3 COMPENSATION

nsurance #chemes ; employees can be co)ered under folloing *o schemes. 6he policy co)ers may bekep* be*een *he range of Rs.200000 *o Rs.500000&$ depending upon *he hierarchies or grade sys*em inyour company.

• 4ersonal Acciden* nsurance #cheme (for employee only!

• Medical nsurance #cheme (<or employee I dependen*s hich can be spouse, firs* *o children,

paren*s or in$las (ei*her of *hem! e*c. #ome companies do no* co)er paren*s&in las, some insurancecompanies do. 4lease check *his i*h *hem before *aking a co)er for your employees.

• Ma*erni*y Benefi*s ; #ome companies ha)e *heir on ma*erni*y benefi* schemes for *heir female

employees and some companies don9* ha)e, ra*her *he depend on Ma*erni*y Benefi* Ac* pro)isions.'oe)er i* is no* necessary, you can choose ei*her of *he one approach. 'a)ing companies onscheme helps a lo* because under *he Ac* go)*. procedures *o claim benefi*s are alays *edious one.

7ARIA$LE PA6 * PER3ORMANCE PA6 * In!enti/es et!

6his is no* a salary. 6he obec*i)e of *his is purely differen* *han salary i.e. you performJ e pay youaccordingly. hereas obec*i)e of #alary is *o HRegularly9 compensa*e an employee i*h a HRegular9 figureagains* *he ser)ices e*ended by him *oards *he organiKa*ion. 'ence *here is no 4erformanceconsidera*ion in #alary or C6C, so *here is no logic *o include *his in C6C s*ruc*ure. F4 is purelyperformance dri)en and is no* regular or fied amoun*. 'ence i* should alays be kep* ou* of main #alary#*ruc*ure. Al*hough mos* of *he companies prefer *o include *his figure in C6C hoe)er i* gi)es )ague andunrealis*ic impression of #alary. Because indi)idual9s epec*a*ions from #alary as *erminology differs *hanncen*i)es& Fariables e*c

Ra*her an independen* and a**rac*i)e Fariable 4ay or ncen*i)e #*ruc*ure can be designed and should be apar* of Reards I Aards #*ra*egy of *he organiKa*ion.

<olloing parame*ers can be kep* in mind.

* can be Random figures i*h broad ranges depending on *he 4osi*ion, rade, =esigna*ion of *heemployees. <or eample if a company has rades A, B, C, =, 1, < *hen e can design incen*i)e ranges likefor rade A, ncen*i)es can be i*hin *he range of 0 *o 200000, here Rs.0 is for poor and nega*i)eperformance and 200000 is for u*s*anding performers. #imilarly employees falling in be*een can be gi)en/ages of *his range. <or eample af*er 4oor ra*ings, you can ha)e A)erage or ood or 1cellen* Ra*edemployees. <or *hem guidelines could beJ *his year a)erage employees ould ge* 30/$50/ (i.e. Rs.30000&$*o 50000&$! ood employees can be gi)en be*een 50/ *o %0/ (i.e. Rs.50000&$ *o Rs.%0000&$ and1cellen* Ra*ed employees can be gi)en be*een %0$E0/ (i.e. Rs.%0000 *o Rs.E0000&$! e*c.

Ano*her approach can be percen*age of C6C can be gi)en as ncen*i)es. * can be 20/, :0/ or 30/ ofMon*hly #alary or Basic ? Alloances as *he case may be. <or eample if you decide *o keep 30/ of Basic



? Alloances as Fariable 4ay or 4erformance ncen*i)es, you can fur*her define eligibili*y on *he basis ofperformance ra*ings as follos. f someone9s C6C is Rs.500000&$ and his Basic ? Alloances comes *o3%5000 *hen his eligibili*y for incen*i)es comes ou* *o be 30/3%5000@22:500 i.e. *he 200 / incen*i)es foru*s*anding performance. 'oe)er if he performs a* Hood9 Ra*ing, he may be gi)en say anyherebe*een 50$%0/ of 22:500 as incen*i)es.

Note&

Dou can also choose ho you ould disburse *he amoun*s of incen*i)es.n my opinion bes* ill be *o include incen*i)e amoun* in *he mon*hly salary of employee for ne* financialyear>. r some companies disburse i* 8uar*erly, half yearly or yearly on a lump sum basis. 6he decisioncan be based on your in*en*ions he*her you ould like *o gi)e a lump sum big amoun* in *he hands of anemployee so *ha* he can realiKe his big personal aspira*ions a* one go, or you can choose *o include *his inmon*hly salary so *ha* employees9 mon*hly income infla*es regularly.

A Tot"l Compens"tion Stru!ture m"y loo8 li8e this'

SALAR6 COMPONENTMONT,L6 ANNUALL6

Amount (Rs' Amount (Rs'

Basic Rs.3500 (min!

'RA 50/ Basic (Me*ro ci*ies! 0/ Basic (+on Me*ro!

6ranspor* Alloance Rs.700 (ma!

Children9s 1duca*ion Alloance Rs.:00 (ma!

#pecial Alloance Balancing <igureMedical Reimbursemen*s Rs.2:50 (ma!

<ood Coupons Rs.2000 (ma!

TOTAL MONT,L6 SALAR6

Net Take Home 6o*al Mon*hly #alary ; 4< ; 4rofession 6a

Retri"l Components

4ro)iden* <und (1mployer.Con*r.!

23.%5/ Basic

ra*ui*y (25 days basic! 25 days Basic per anum

Annu"l Components

-ea)e 6ra)el Alloance +o -imi*

if* Fouchers Rs.5000 (ma!

Per9uisites + Only %or SeniorM"n"4ement

Car As gi)en in guidelines

Ren* free Accommoda*ion As gi)en in guidelines

1#4 As per company9s scheme

Any o*her 4erks

ANNUAL C'T'C'

OT,ER $ENE3ITS4ersonal Acciden* nsurance #cheme ; Rs.:00000&$Medical nsurance #cheme ; Rs.:00000&$

PER3ORMANCE LIN:ED INCENTI7E PLAN6he 4erformance -inked ncen*i)e 4lan ill be based on employee9s 4erformance Ra*ings during our

Annual 4erformance Appraisal 4lan in *he mon*h of March & April each year. 1ach employee ould beeligible for a performance based incen*i)e plan based on folloing guidelines.(ncorpora*e any one of *he folloing!Maimum 4o*en*ial ncen*i)es under 4-4 ill be 30/ of 6o*al Mon*hly #alary. R up *o Rs.%5000&$ p.a.

compensation rules and design guidelines

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