Hey everyone! I’d love your inputs in salary structuring. So far there have been no salary components and we’ve be paying out a flat rate to all our employees. Now if we want to have a structure in place, is 40-20-40 a good approach? 40%basic, 20%hra , 40% other allowances. Or are there any other philosophies being followed by you all. Would love your inputs

50 percent of CTC has to be basic by law

I agree with Rohan and HRA 40% of basic and then rest of the amount you can adjust in allowances.

Thanks a lot! This helps. One follow up question. In addition to LTA, what other allowances can help employees save tax, now that there’s a 50k std deduction anyway.

You can create a tax-efficient salary structure, which may consist of Basic Pay (though 50% is best practice but not a law yet as codes are yet to receive assent), HRA, Books and Periodicals, LTA, Child Education Allowance (this will benefit the employees who have children, though a small amount). There are other components too that can be added to make it more tax efficient, given the number of employees are big in numbers and there is a finance team to support.

Now a days trend is to go leaner 50% basic n 50% HRA .no other allowances are required if you have these 2 components

I differ here. Employees during the hiring process ask the components of the salary to understand how much they will be able to save and will have in hand each month. There is a new tax regime in which this break-up doesn’t helps. However, at senior roles majority of the team goes for old tax regime in which the break-up helps.

@Wristy compensation structure n tax saving components are 2 different genres. I responded for structure. If you need to offer bouquet of benefits under tax saving, sky is a limit .