designing a simple compensation structure

8/11/2019 Designing a Simple Compensation Structure

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Compensation is thetotal amount of themonetary and non-monetary pay providedto an employee by an

employer in return forwork performed asrequired.

Compensation alsoincludes payments such

as bonuses, profitsharing, overtime pay,recognition rewards andchecks, and salescommission.


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The ultimate goal of compensation planning is toreward and encourage employees to do well in theirjobs. Some of the objectives are sought to beachieved through effective compensation planninglike:

Entice the employees

Retain the best talent

Ensure equity

Reward new ideas andbehaviors

Cost control

Compliance


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Classification of Salary Components

Compensation Structure

Governance/Compliance

Sample Salary Component Structure


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Fixed Salary Details

Basic Salary 40% to 50% of CTC

House Rent Allowance

50% of Basic Salary for Metro Cities

(Chennai, Mumbai, Delhi and Kolkata)

40% of Basic Salary for Other Cities

Conveyance / Transport AllowanceRs. 800 per month (for handicapped Rs. 1600 per

month)

Child Education AllowanceRs. 100 per child/per month (maximum of two

childrens)

Other / Special Allowance As per Section 10(14) of Income Tax act.


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Non-Monetary Benefits / Perks Details

Company CarAs per company car policy to senior management

staff

Accommodations Company provided accommodations

Fixed Assets Fixed Assets / Furniture & Fixtures

Employee Stock Option Plan (ESOP) As per company ESOP plan

Others

Food Coupons (Rs. 1100pm), Gas, Electricity &

Water

Helper , House Maid, Gardener, etc.


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Reimbursement Components Details

Medical Rs. 15000 p.a. (for self, spouse and dependants)

Leave Travel Allowance (LTA)

One month basic salary

Two claims in a block of 4 years (current block 2014- 2017)

TelephoneAs per company compensation policy Rs. 2000

4000 p.m.

Vehicle Maintenance/Petrol

Employer car (fuel & maintenance expenses met by

employer)

No limitUp to Rs.10000 p.m.Employee car (fuel & maintenance expenses met by

employer)

a. Rs. 1800p.m. for small car (with 1.6cc)

b. Rs. 2400 p.m. for big car (with above 1.6 cc)

Driver Recommended for senior management staff


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Retirement Benefits Details

Company Contribution to Provident Fund 12% of PF wage

Gratuity 4.81% of basic p.m.

Superannuation As per company policy / trust by-laws

Pension Fund

As per company policy or New Pension Scheme

(NPS)

InsuranceGroup Mediclaim Insurance

Group Life Insurance, etc.

Employer Contribution to Employees State

Insurance (ESI)

4.75% of ESI wage


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Ensure that the salary components are in compliancewith income tax rules and labour laws

Refer to minimum wages act-state rules for any

specific segment of workers Union employees salary structures are governed by

Union agreement/settlement

Ensure that the special/other/personal allowance

is lesser than the other components in salarystructure


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To get detailed information about Designing a SimpleCompensation Structure in video form please click the link

below:
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designing a simple compensation structure

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