Compensation is the total amount of the monetary and nonmonetary pay provided to an employee by an employer in return for work performed as required. Compensation also includes payments such as bonuses, profit sharing, overtime pay, recognition rewards and checks, and sales commission.
The ultimate goal of compensation planning is to reward and encourage employees to do well in their jobs. Some of the objectives are sought to be achieved through effective compensation planning like: Entice the employees Retain the best talent Ensure equity Reward new ideas and behaviors Cost control Compliance
Classification of Salary Components Compensation Structure Governance/Compliance Sample Salary Component Structure
Fixed Salary Basic Salary
House Rent Allowance
Details 40% to 50% of CTC 50% of Basic Salary for Metro Cities (Chennai, Mumbai, Delhi and Kolkata) 40% of Basic Salary for Other Cities
Conveyance / Transport Allowance
Rs. 800 per month (for handicapped Rs. 1600 per month)
Child Education Allowance
Rs. 100 per child/per month (maximum of two children’s)
Other / Special Allowance
As per Section 10(14) of Income Tax act.
Non-Monetary Benefits / Perks
Details
Company Car
As 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.
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)
Telephone
As per company compensation policy Rs. 2000 – 4000 p.m.
Vehicle Maintenance/Petrol
Employer car (fuel & maintenance expenses met by employer) No limit – Up 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
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)
Insurance
Group Mediclaim Insurance Group Life Insurance, etc.
Employer Contribution to Employees State Insurance (ESI)
4.75% of ESI wage
Ensure that the salary components are in compliance with 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 salary structure
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