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DRAFT

Proposal for Modified Pay structure

We have different types of Pay Structures in our organization as detailed in


Annexure - 1. Out of 4320 employee on rolls, 1012 employees are on Time Pay Scale
as on October 31, 2010.

With the present Time Pay Scale system, most of the employees feel unsatisfied on
the take home salary. Further other benefits such as Provident Fund. Dearness
Allowance and increment on scale hikes are not much understood by them.

Keeping the above factors in mind, it is proposed to modify the existing Pay
Structure which results in higher take home salary.

Salient features of the Modified Pay structure are as under:

 Change over from the ‘Time Pay scale’ system to a ‘Modified Basic Pay’
system.

 The Current Dearness Allowance component (101%) gets removed which will
reduce the provident fund contribution and increase the (Take Home) net
pay.

 It is proposed to add 50 % D.A in the basic pay so that the medical and LTC
benefits can be enhanced which are tax free up to certain specified limits.

 House rent allowance to be revised to 30/40/50 % of basic pay .

 Different components of salary including allowances such as Conveyance


and Special allowance to be added. These allowances would be equal to
51 % of D.A.

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The proposed Pay structure in comparison with the existing Pay structure is given in
the table below:
Existing Pay structure Proposed pay structure Remarks
1 D.A is calculated on Basic 50% D.A is merged in to Basic As per the PDD pay
Structure
2 H.R.A is calculated as 30% on Basic H.R.A is calculated as 50% of Due to hike in quantum
Basic of Basic and % of HRA,
amount of HRA will
increase.
3 C.C.A is a fixed component C.C.A is a fixed component As per the PDD pay
Structure
4 There is no SPL Allowance and Balance 50% D.A is treated as PDD Pay Structure does
Conveyance Allowance SPL Allowance and Conveyance not contain Conveyance
Allowance. Allowance (CA). CA
provides Tax Exemption.
5 P.F is calculated on Basic and D.A P.F.is calculated only on Basic. Take home salary will
Components increase.
6 1.75% employee’s ESI contribution is not 1.75% employee’s ESI Contribution Take Home Salary will
included under Employee Deductions. is included under Employee reduce.
deductions.
7 P.T as per the norms of Government P.T as per the norms of No Change
Government
8 Medical Reimbursement ( MR) @ one Medical Reimbursement (MR) @ Due to hike in basic on
basic per annum. one basic per annum. a/c of 50% DA merger,
MR amount will
increase.
9 LTC @ one basic per Two years spell. LTC @ one basic per Two years Due to hike in basic LTC
spell will increase.
1 Employer Contribution of ESI component Employer Contribution of ESI Because of inclusion of
@ 4.75% on Gross is not included , component @ 4.75% on Gross is Employer ESI
0
included , contribution, CTC will
increase.
1 Employer Contribution of Gratuity Employer Contribution of Gratuity Due to inclusion of
component is not included component is included. Gratuity contribution,
1
CTC will increase
1 EL Encasement component is included EL Encasement component is Due to hike in Basic,
included CTC will increase
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1) PDD is following the Corporate Pay structure, under which 1600 employees are now
covered in PDD..

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2) Out of 4320 employee on rolls, 1012 employees are on Time Pay Scale, who are
proposed to be brought under PDD Pay Structure. Remaining employees will
continue in different pay structures or Fixed Pay / Honorarium pay as the case may
be.
3) The following modification is proposed for the proposed conversion of 1012
employees in to PDD pay structure:
a) New Employees: In case of new employees, PF will be deducted on basic pay
maximum upto Rs.6500/- p.m, Employer contributes the matching fund
accordingly.
Existing employees: PF Contribution, in case of existing employees whose
basic pay is above Rs.6500/- p.m., will become static.
b) E.S.I component is not included in PDD pay Structure which will be included
under the proposed pay structure for E.S.I. covered employees.
c) Gratuity component is not included in PDD pay Structure which will be included
under the proposed pay structure.
4) With proposed pay structure, employees are categorized in to three levels. Level -1,
Level -2 and Level 3.
5) With proposed pay structure, major portion of the employees will come under one
pay structure. This will reduce the Administrative work content.
6) Employees Take home salary will increase.
7) Performance-based Increments will be declared on percentage basis instead of
scale-based regular increments. Appraisal system will consequently be
implemented.
8) The Basic pay will be fixed in intervals of Rs200/- (For example, 5000/-, 5200, 5400-,
5600) and so on.
9) The proposed Pay structure in comparison to the existing Pay structure is shown in
the table, at Annexure II.
ANNEXURE II.

Existing and Proposed Pay Structure details

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Components Existing Pay Structure Proposed Pay Structure
A ) Basic Basic Basic+(50% of DA)A+B1/2
B ) D.A DA NO DA
C ) H.R.A 30% of Basic fixed 30/40/50% of Basic fixed
D ) C.C.A As per existing norm As per existing norm
SPL allowances 51% of DA
E)Special Allowances NO Other Allowances
Balance( incl Conveyance)
E1)Conveyance NO Other Allowances 800 of Balance 51% D.A
1) Gross Pay (A+B+C+D) (A+C+D+E+E1)
G ) P.F 12 % of (A+B) 12 % of A
H ) P.T As per slab rates As per slab rates
@ 1.75% of Gross up to
I) E.S.I Employee Contr NO ESI Component
<15000p.m
J) T.D.S As per existing norm As per existing norm
K)Total Deductions (G+H+J) (G+H+I+J)
2 ) Net Pay (1 - K) (1 – K )
@ 4.75% on Gross up
L) E.S.I Employer Contr NO E.S.I Component
to<15000p.m
3 ) CTC-1 (1 + G) (1 + G+L)
M) Medical A/12 A/12

N) Gratuity NO Gratuity Component A+B*15/26 p.a.

(One basic pay/block of two (One basic pay/block of two yrs)


O ) L.T.C
yrs) A/24 A/24
P) E.L Encashment A+B*15/30 p.a A*15/30 p.a
4) CTC-2 (3+M+O+P) (3+M+N+O+P)

Employees are categorized based on existing Gross pay as detailed below:

S.No Levels Gross pay Total No of


employees
1 Level -I Below Rs.15000/- p.m
2 Level - II Rs.15000 to 25000/- p.m
3 Level - III Rs.25000/- p.m and above
Total

H.R.A, C.C.A and Conveyance Allowance as detailed below will be extended:

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Levels H.R.A Conveyance

1 50% of Basic Rs.800/- p.m


2 40% “ Rs.800/- p.m
3 30% “ Rs.800/- p.m

Gratuity: Gratuity component is included in the proposed pay structure subject to eligibility
criteria under the Act.

Conveyance Allowance: Provides IT exemption up to a maximum of Rs.800/- p.m.

E.S.I: Employer’s contribution is included under the Proposed Pay Structure for ESI covered
employees.

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Comparative statement for existing and proposed pay structure
The following table gives the comparison between the existing pay structure and the
proposed pay structure through an example where it is assumed that the basic pay is
Rs 4500, in the existing pay structure.

Proposed
Components of with50%DA Difference %
Salary Existing merger to Basic (+/ -)
BASIC PAY 4500 6773
DA 4545 0
HRA 1350 3387
CCA 200 200
Conveyance 0 800
SPL Allow 0 1518
GROSS PAY 10595 12678
PF 1085 813
PT 100 100
E.S.I 185 222
Total Deduction 1370 1135
E.S.I Employer 503 602
NET PAY 9225 11543 2319 25
CTC – 1 12184 11092 1909 16
Medical 375 564
LTC 188 282
EL 377 0
Gratuity 435 326
CTC - 2 13558 15265 1707 10

1) The Pay hike consequent to proposed modification in the existing pay structure will
approximately work out to 10% which will be one time hike.
2. The last D.A increase was done during 2008, there after the change in the rate of D.A
is pending for the last four quarters i.e for 2009 and 2010 which works out to a
cumulative total of 29% as detailed below.

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S.No Period D.A %
Declared
1 01.01.2009 06%
2 01.17.2009 05%
3 01.01.2010 08%
4 01.07.2010 10%
Total 29%

3) There would be no yearly annual increments. Further increments will be only


performance based may be decided by Management.

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 ONE TIME HIKE PROPOSAL: A one time hike across the board with

effect from Jan 1st 2011 is being proposed. The percentage hike will however
depend on the length of service, nature of work and category of the city, as
defined below.
 The quantum of hike may not be uniform. It would vary subject to an upper
limit as specified on CTC. This is required since over the years employees
have been taken with different salaries even at similar levels. This exercise
will also help us to balance out the salaries within each region and make the
structure more uniform.

Financial Impact

Based on the period of service as defined below, the financial impact can be
considered as under.
A. Employees who have completed one year of service on March 31, 2008.
B. Employees who have completed six months of service on March 31, 2008.
C. Employees who have not completed six months of service on March 31,
2008.
The following table defines the maximum percentage of hike for each of the
above categories
A. Employees who have completed one year of service on March 31, 2008

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Category of Marketing Staff Marketing – Support Admin Staff
City Staff
CTC 1 CTC 2 CTC 1 CTC 2 CTC 1 CTC 2

A
B
C
D

B. Employees who have completed six months of service on March 31, 2008.
(CTC 2 is not applicable since they are all in CTC 1 and therefore is given for
reference only)
Category of City Marketing Staff Marketing – Support Admin Staff
Staff

CTC 1 CTC 2 CTC 1 CTC 2 CTC 1 CTC 2

A
B
C
D

D. Employees who have not completed six months of service on March 31,

2008. They will be converted to the new pay structure with their current
CTC.(suitably matched with the nearest higher CTC of new pay structure.)
 The overall financial impact is an increase in salary expenditure by 17.10%. (The
salary expenditure will go up from Rs. 293.22 lakh to Rs. 343.38 lakh, i.e. Rs
50.16 lakh per month.(Details are placed at Annexure 2)
Implementation of the time pay hike

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 The one time hike will be implemented subject to the above maximum
permitted percentage hike limits based on position, nature of work and
category of city. The current CTC would be multiplied by the appropriate
percentage hike as per the above table and the new CTC will be arrived at.
The salary of the employee would then be adjusted (if necessary) to the next
higher CTC with corresponding basic pay as per the new pay structure.

Part II: Appraisal System – Salient Features


 It is proposed to appraise employees once a year and determine the annual
pay hike based on their performance evaluation.
 The date of appraisal would be one year from the last date of appraisal/ date
of joining(whichever is applicable)
 Periodicity of appraisal process for PDD would be once in a quarter(i.e. four
times in a year). Employees who fulfill the one year criteria would be taken
up for appraisal in the respective quarter. This is being currently followed.
 Current annual hike as per Time Scale system is about 2 % - 3 % on CTC
depending on scale. If we add the Dearness Allowance component hike, then
the total annual hike is about 8 % on CTC.
 Since the Dearness Allowance component is being removed, the benefit of
DA hikes will not be available. This also needs to be factored in. In the last
few years the impact of DA hikes on CT has been about 5 % per annum.
The following table compares the DA rates and the impact on CTC:
DA Revision in month Jan 2006 July 2006 Jan 2007 July 2007
DA %
Basic (Rs) 10000 10000 10000 10000
CTC 1(Rs) 22788 23348 24020 24692
CTC 2(Rs) 24753 25344 26041 26738
% impact with every increase in DA

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CTC 1 2.45 2.90 2.78
CTC 2 2.35 2.75 2.68

 Proposed annual Increments on Appraisal: Keeping the above in mind as well


as the feedback on annual hikes expected, it is proposed to define maximum
permissible percentage hike in CTC as per the table below:

Maximum Permissible % hike on CTC


Sl. CTC Range
Marketing Marketing
No. (in Rs.) Admin staff
Staff support Staff
1. Up to 12500 25% 22.5% 20%
2. 12501 - 25000 22.50% 20% 17.50%
3. 25001 - 35000 20% 17.50% 15%
4. Above 35000 17.50% 15% 12.5%

 The above indicated maximum permissible percentage hikes are the best
performers. Based on the individual’ performance, the percentage of hike
will be determined subject to the maximum limits specified above. This
would be as per the evaluation of the employee by his/her section head and
subject to approval of HOD. An additional 2.5 % hike (maximum) can be
given in exceptional circumstances subject to approval of HOD.
 Appraisal Process: The appraisal process will require the person doing the
appraisal to rate the employee being appraised on various relevant attributes
on a scale of 10. A percentage would then be worked out which would
determine the extent of percentage hike to be given as per the table given
below. Detailed guidelines would be prepared on this.

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DRAFT

Proposal for the Modified pay structure

The present on going economic scenario of recession has a serious impact on organization and its
employees in terms of revenue generation. As part of stabilizing the impact of recession on the
organization, Icfai employees are broadly classified in to Core group and Non-core group of
employees. Those employees who are directly involve in the academic activity i.e Teaching,
Marketing. Development and Student Placements, as the case may be come under Core group,
while those employees who are involved in the back-end support type of jobs i.e Admin support,
Academic support etc. under Non-core group.

As per the current salary system, we have a time pay scale system which is followed by the
organization

It is also observed that many of the employee’s emphasize on the take-home salary and other
benefits such as Provident Fund, Dearness Allowance hikes are not much understood and
appreciated by them.

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In view of above, it is proposed to restructure the salary of Icfai and its associates in respect of
Non-Core employees in to fixed pay in order to stabilize the system by not effecting Gross
amount drawn by the employee and reducing the CTC by removing the DA component, as
illustrated in the enclosed Annexure I.

Annexure-I

Proposed 1
with
Components of Salary Existing 50%DA Difference
merge to
Basic

BASIC 4500 6773 2273


DA 4545 0 -4545
HRA 1350 2032 682
CCA 200 200 0
SPL 0 2318 2318
GROSS 10595 11322 727
PF 1085 812.7 -272
PT 100 100 0
NET 9410 10410 1000
CTC – 1 11680 12135 455
Medical 375 564 189
LTC 188 282 94
EL 377 326 -51
CTC – 2 12620 13307 687

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NET 11%
GROSS 7%
CTC – 1 4%
CTC – 2 5%

 Pay system change over from the ‘Time Pay scale’ system to a ‘Fixed Pay’
system.

 The Current Dearness Allowance component (101%) gets removed.


 This will lead to a decline in the sum of provident fund contribution and lead to
increase in the net pay. It is proposed to enhance the basic pay by 50 % and
balance 51% will be booked under different components of salary, Further Other
Allowance will divided in to conveyance and Special Pay, so that the
Conveyance, medical and LTC benefit can be enhanced which are tax free up to
certain specified limits.

 House rent allowance be fixed at 30 % of basic pay

 There would be no automatic annual increments. Increments will be based on the


performance appraisal (In Part – II, proposals regarding appraisal system are
enumerated.)
.
 The Basic pay will be fixed in intervals of Rs200 (For example, 5000/-, 5200,
5400-, 5600 nd so on.)
 The proposed Pay structure with comparison to the existing Pay structure is
shown in the table, as Annexure II

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 Since the Dearness Allowance component is removed, the half yearly DA hikes will not
be available. This also needs to be factored in. In the last few years the impact of DA
hikes on CTC comes about 5 % per annum.

 The one time hike may be considered as shown in Annexure I as per which the maximum
rate works as 4% hike in CTC -1 and 5% hike in CTC-2. The current CTC would be
multiplied by the appropriate percentage hike as per the above table and the new CTC
will be arrived at. The salary of the employee would then be adjusted according to the
new basic pay structure.

Appraisal System – Salient Features


 It is proposed to appraise employees once a year and determine the annual pay hike based
on their performance evaluation.
 The date of appraisal would be one year from the last date of appraisal/ date of
joining(whichever is applicable)
 Current annual hike as per Time Scale system is about 2 % - 3 % on CTC depending on
scale. If we add the Dearness Allowance component hike, then the total annual hike is
about 8 % on CTC.
 Since the Dearness Allowance component gets removed, the benefit of DA hikes will not
be available. This also needs to be factored in. In the last few years the impact of DA
hikes on CTC has been about 5 % per annum.
 Proposed annual Increments on Appraisal: Keeping the above in mind as well as the
feedback on Respective Heads of departments, it is proposed to define maximum
permissible percentage hike in CTC as per the table given below:
Annexure II
Maximum Permissible % hike on CTC
Sl. CTC Range
Academic
No. (in Rs.) Managerial Staff Admin staff
support Staff
1. Up to 12500 25% 25% 20%
2. 12501 - 25000 25% 25% 20%
3. 25001 - 35000 25% 25% 20%

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4. Above 35000 25% 25% 20%

 The maximum permissible percentage hikes indicated above are the best performers.
Based on the individual’ performance, the percentage of hike will be determined subject
to the maximum limits specified above. This would be as per the evaluation of the
employee by his/her Respective head and subject to approval of HOD.

 Appraisal Process: The appraisal process will require the person doing the appraisal to
rate the employee being appraised on various relevant attributes on a scale of 10. A
percentage would then be worked out which would determine the extent of percentage
hike.

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