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Salary Calculations

1. How monthly Gross is calculated?– Annual CTC Base Pay divided by 12

2. How Basic is calculated?– 35% to 45% of Gross Salary (depends on

the Co.’s policy). Most companies follow 40% of Gross Salary.

3. How Dearness Allowance is calculated?– Dearness allowance (D.A.) is part of a

person's salary. D.A. is calculated as a percent of the basic salary. This amount is then added to the basic salary. Rates vary as per rural/urban areas etc.

Salary Calculations• How House Rent Allowance (HRA) is

calculated?– HRA – 50% of Basic (Chennai, Kolkatta,

Delhi, Mumbai )– HRA - 40% of Basic if Population >

10lakhs & 10% of Basic if Population < 10 Lakhs (Other Cities)

Salary Calculations

• How Leave Travel Assistance is calculated?– Leave Travel Assistance : 12%-13% Of Basic (Depends Of

Co.’s Policy)• What is the Eligibility of Children Education Allowance?

– CEA : Rs. (200 Per Month)• What is the Eligibility of Conveyance?

– Rs. 800 per month• What is the Eligibility of Medical Allowance?

– Rs.15000/- P.A. (Till 15000/- Tax is not exempted)• What is the Eligibility of Food Coupons?

– Food coupons are given from Rs.500 to Rs.1650/-(varies from co. to co. according to employees levels)

• How Special Allowance is Calculated?– Special allowances is calculated from: Monthly Gross –

(Basic+HRA+Conveyance+Food coupons+LTA+Children Education+Medical Allowance+other allowances). Varies From Co. to Co

Salary Calculations

• How Bonus is calculated?– Bonus is calculated from a rate of 8.33% to

a maximum of 20%(employer’s wish) of an employee’s salary or wage for the days he/she has worked during that accounting year.

– Maximum Salary considered will be Rs.3500/- per month

– If the basic exceeds Rs.10000/- bonus is not applicable

Salary Calculations• How Leave Encashment is calculated?

– Leave encashment is calculated as below a. In case of company: Basic x no of leave balance

30 b. In case of factory:

Gross x no of leave balance 26

Salary Calculations

• How PF is calculated?– PF:1. Employees share

PROVIDENT FUND 12% of basic

– 2. Employers share 12% of basic of which 3.67% goes to Provident fund and remaining 8.33% goes to Pension fund

(PF is calculated on 12% of basic, where the maximum deduction should be 780 or whichever is less- i.e. basic should not exceed 6500/-)

Salary Calculations• How Employee State Insurance (ESI) is

calculated?– ESI – employees whose gross salary is

Rs.10000/- and below are eligible for ESI– Employee’s share:1.75% on salary (gross)– Employer’s share:4.75% on salary (gross)

• How Employees Deposit Linked Insurance (EDLI) is calculated?– Only Employer has to make contributions @

0.5 % of basic wage & dearness allowance

Salary Calculations• How Gratuity is calculated?

– Gratuity is paid after 5 years of completion of service The amount does not exceed Rs 3,50,000/-

– Formula for calculating gratuity – Salary (Basic + DA) x 15 days x No. of yrs

26 – Simple calculation= 4.81% of basic

Salary Calculations• How Pension is calculated?

- Pension Amount = (Pensionable Service (No. of Years) * Pensionable Salary )

70

• How Attrition is calculated?

- Resigned employee x 100 No. of existing employees

(done either monthly or yearly depending on the company)

Salary Calculations• How Full and Final Settlement is calculated?Payable to Employee:-

• Salary, Bonus, Leave encashment, Gratuity, Traveling expenses, Sunday working day, Medical expenses reimbursement, Motor car / scooter expenses

Receivable from Employee:-

• Advance against salary, LoanImprest ( Advance Money for e.g. for clothing, Accommodation, and company will cut the money after 4 to 5 months from the salary), Tour advance, Notice pay, Income tax, interest on loan

Payable minus receivables = FF S• Always calculate amount of Notice period on Gross payment

for the month ( Basic+ other allowances which are paid in salary. )

Salary Calculations• How Professional Tax is Calculated?

– Professional Tax is a state based Tax- deduction is from the gross income

– Duration of deduction is half year• 1st day of April to 30th September• 1st day of October to the 31stMarch of a

year.– PT is deducted slab wise-fixed by the state

government (it varies according to the salary range)

Salary Calculations• How salary is calculated?

– Salary is been calculated on the basis of number of days in that particular month, For January it will be 31 days, for April would be 30 days and for February it would be 28 or 29 days.

Workmen’s Compensation

• How WC is calculated?- Case 1) Death of Employee – WC Eligibility is 50% The calculation is – Check worker’s Age and his Factor Maximum Wages x 50% x Factor

Maximum Eligibility for Fatal Injury - Rs.4,57,080 - Case 2) Permanent Total Disablement - WC Eligibility is 60% The calculation is – Check worker’s Age and his Factor Maximum Wages x 60% x Factor

Maximum Eligibility for Permanent Total Disablement - Rs.5,48,496

- Case 3) Temporary Total Disablement First 3 days are excluded

The calculation will be No. of days – 3/15*25%

No. of days – 3 x 25% 15

Maximum Eligibility for Temporary Disablement - Rs. 2000 pm

up to a period of 5 years - Case 4) Maximum Eligibility for Permanent Partial Disablement -

- According to incapacity caused

Performance Link Bonus

• How Performance Link Bonus is calculated?– For Eg:6 months and 50%– PLB calculation is 50/100*6/12*Yearly

Bonus Eligibility of an employee

– Patricia