Compensation structure for StartUp!

Hi,

How to set up a Compensation structure if you are start up company?
A quick startup guide would be very helpful. Please suggest.

Thank you.

2 Likes

Hi Nisha,

Standard Compensation structure can be:

Gross Salary (A)
Basic Salary= Max(Minimum Wages OR 30% to 50% of CTC)
HRA = 40%/50% of Basic
Other Allowance = Left over of Gross

Benefits (B)
Employer PF = 13% of Basic Salary
Employer ESIC = 3.25% of Gross Salary (If salary less than 21000)
Gratuity = 15/26*Monthly Basic Salary/12

CTC (A+B) = Gross Salary + Benefits

Deductions ©:
Employee PF = 12% of Basic Salary
Employee ESIC = 0.75% of Gross Salary
PT = As per state norms

Net Salary (D = A-C) = Gross Salary - Deductions

Please note:
Other Allowance can be further split into flexible allowance for Tax Exemptions

  • LTA
  • Reimbursements (Petrol/Travel)
  • Children Education Allowance
    & others
2 Likes

Hi Ankit
Can you please help me with the compensation structure when basic pay is 15k and there are no others allowance.
So the structure my company follows is as below…

Basic - 15 k
Hra (this has been taken as a balance fig)
=Gross salary

+Employer pf
=CTC

(-)Deductions:- employee pf +employer pf +esi employee+esi employer + pt

= Net in hand salary.

  • Performance bonus

= Total CTC (Gross sal+ pf +esi + pb)

2 Likes

Hi @ayesha89

Considering your salary structure it’s good to have like below.

Gross = Basic + HRA (if required DA should be considered for employees less than 15k).

and in deductions it should be

Deductions = PF + ESI + PT

Net take home = Gross - Deductions

  • Note: HRA are subjected to certain IT exemptions and it’s always good to have a percentage. Balance create a component called “Special Allowance” and add there.
2 Likes
Considering Maharshatra State
Skilled Labour
Basic 12,386
HRA 620
GROSS SALARY 13,006
Employer PF 1,610
Employer ESIC 423
Gratuity 595
CTC 15,634
Employee PF 1,486
Employee ESIC 98
PT 200
NET SALARY 11,222

In Maharashtra, 5% HRA is mandatory.

1 Like

With Basic Pay as 15000

Basic 15,000
HRA -
GROSS SALARY 15,000
Employer PF 1,950
Employer ESIC 488
Gratuity 721
CTC 18,159
Employee PF 1,800
Employee ESIC 113
PT 200
NET SALARY 12,888
2 Likes

Dear Dinesh
Kindly elaborate 80D Senior Citizen Parents Benefit 50K. What all can be covered.

Thanks & Regards
Jain Seshan

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Particulars Maximum Limit
Medical Insurance premium + Preventive health checkup (sub limit of Rs. 5000) of Self, Spouse and dependent Children 25,000
Medical Insurance premium + Preventive health checkup (sub limit of Rs. 5000) of parents who are non-senior citizens 25,000
Medical expenditure on Self, spouse and dependent Children NOT ALLOWED
Medical expenditure on Parents who are non-senior citizens NOT ALLOWED
MAXIMUM LIMIT OF DEDUCTION U/S 80D 50,000
Particulars Maximum Limit
Medical Insurance premium + Preventive health checkup (sub limit of Rs. 5000) of Self, Spouse and dependent Children Non Senior Citizens 25,000
Medical Insurance premium + Medical expenditure + Preventive health checkup (sub limit of Rs. 5000) of parents who are senior citizens 50,000
Medical expenditure on Self, spouse and dependent Children NOT ALLOWED
Medical expenditure on Parents who are senior citizens COVERED ABOVE WITHIN THE LIMIT OF Rs. 50000
MAXIMUM LIMIT OF DEDUCTION U/S 80D 75,000
2 Likes

Hi @jain

Every individual or HUF can claim a deduction under Section 80D for their medical insurance which is taken from their total income in any given year.

An individual can claim a deduction of up to Rs 25,000 for the insurance of self, spouse, and dependent children & An additional deduction for the insurance of parents is available to the extent of Rs 25,000 if they are less than 60 years of age or Rs 50,000 (as per the Budget 2018) if your parents are aged above 60.

If both the taxpayer and the parent whom the medical covers have been taken for are aged more than 60 years, the maximum deduction that can be availed under this section is to the extent of Rs 1,00,000.

Any payments made towards preventive health check-ups will entitle a taxpayer to a deduction of up to Rs 5,000, which is within the overall limit of Rs 25,000/Rs 30,000.

For ref: Budget Changes April 2018-2019 - Greytip Knowledge Center - greytHR Admin Guide

2 Likes

Hi

You can also add the below info.

Budget 2018 amended Section 80D of the Income Tax Act which allows a deduction for medical expenditure incurred on senior citizens. However, senior citizens must not be covered under any health insurance policy.

3 Likes

Yeah, true!

Most of the times they are not covered by default. But majority of employers do provide parental schemes, which an employee can utilise.

There are lot of insurance agencies who are doing for companies and are easily available in the market.

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