PAY PACKET

Module 3

PAY PACKET
Pay packet - Wages enclosed in an envelope for distribution to the wage earner.
With a pay package totalling $8.8 million, or Rs 49 crore, the boss of Genpact, NV Tyagarajan was the highest-paid chief executive in India's IT services and BPO industry in 2011.

ANNUAL: USD 400,000.00

ANNUAL: USD 4,800,000.00

PAY PACKET

Annual: USD 39,000,000.00 Monthly: USD 3,250,000.00 Weekly: USD 780,000.00 Daily: USD 156,000.00 Forbes May 2012: $39 million France Football March 2012: $33 M euro Forbes 2011: $32 million France Football March, 2011: 31 million euro wages and endorsements Forbes April 21, 2010: $20million, Forbes May 2012 $39 million
LIONEL MESSI

GENERAL COMPONENTS OF COMPENSATION

Substantial amount to meet basic needs Extra to meet rising cost of living Cushion to meet price fluctuations Extra for extra work Facilities or reimbursements to satisfy positional needs Extra for offering expertise or creative contribution Amount guarantee for old age

FORMS OF COMPONENTS
Above components could be grouped into 2 forms: Statutory components of compensation (Components that are essential as per the legislations) Obligatory components of compensation (bind the employee with the company)

BREAK UP OF COMPONENTS OF COMPENSATION Compensation package=Basic+DA+HRA CCA (City compensatory allowance) +Conveyance +Additional Perks & Fringe

BASIC
As the name suggests, this forms the very basis of salary. This is the core of salary, and many other components may be calculated based on this amount. (Provident Fund : 12% of Basic)

It usually depends on ones grade within the companys salary structure. It is a fixed part of ones compensation structure.

DEARNESS ALLOWANCE (DA)

It takes care of the price inflation that affects the purchasing power of the employees. It is a regular and continuing part of the compensation package that gets changed according to the price increase.

FIXATION OF DA
For the employees of PSUs, Governments through the Wage Board and/or the Pay Commissions fix this component periodically based on the CPI (Consumer Price Index) to satisfy the real values of wage or salary.

9-11

CONSUMER PRICE INDEX (CPI)

A theoretical price index that measures relative cost of living over time.

Tokyo 294 (highest) Bangalore 55 Delhi 64

HRA (HOUSE RENT ALLOWANCE)

Takes care of the cost of living and provides extra money to meet the housing accommodation expenses so that the employee can maintain his/her status.

FIXATION OF HRA
The wage board or pay commission fixes HRA in the government sector, and in the private sector it is fixed by the employers depending upon the wage/salary policy and the capacity to pay. HRA : 50% of Basic for Major Cities (i.e.) Chennai, Delhi, Mumbai, Bangalore etc 40% of Basic for all other locations

CCA (CITY COMPENSATORY ALLOWANCE)

In the same region, the rental rates may vary according to the ranking of the city such as urban, metro, or class A, B, C etc. To meet the expense of cost of living in different grades of the city, employer includes CCA in compensation package.

ANNUAL BONUS
Bonus is the most expected component of compensation, especially when an employee stays with the organization for more than a year and expects recognition of his/her continuous efforts throughout the year to let the organization earn and grow.

FORMS OF ANNUAL BONUS

Customary bonus: Commitment of org defined in their policy, such as ex-gratia payment (One-time extra payment in addition to normal pay, made out of gratitude or courtesy or in recognition of a special contribution), attendance bonus, productivity bonus etc which cannot be claimed as a right but depends on the companys policy and plans. Profit based bonus: Payment of the share of profit or extra earning achieved through the efforts of the employees.

ALLOWANCES

Project allowance is offered to the employees sent to implement any project outside the works and to motivate him/her to be away from the family. Shift allowance is to encourage an employee to work in shifts such as employees of call centres or outsourcing agencies. Washing allowance helps the employees to maintain neatness and cleanliness without losing their real earnings.

CONVEYANCE ALLOWANCE

Conveyance allowance is paid to the employee to compensate the expenses incurred by the employees on travelling.

WHAT IS CTC?

Cost to company: Total cost incurred to hire, maintain, retain the employees

DIFFERENCE BETWEEN CTC & TAKE HOME SALARY

Cost to company (CTC) is the total cost that an employee is incurring in a company. Gross Salary is the one which you see every month. But this is before any deduction. Net Salary is what an employee get to his/her hand after deductions.(this is the take home salary)

http://www.bemoneyaware.com/blog/salary/

Example Lets see an example explaining the salary. An arbitrary salary break up is given below (Note: salary structure varies from one company to another): Component of Salary(per annum or p.a) Amount Basic Salary 480,000 Dearness Allowance 48,000 House Rent Allowance 96,000 Conveyance Allowance 12,000 Entertainment Allowance 12,000 Overtime Allowance 12,000 Medical Reimbursements 15,000 Gross Salary 6,75,000

Benefits vary from company to company. Example of benefits for the above employee are: Medical insurance 2000 Provident Fund (12% of Basic) 57,600 (12% of 4,80,000) Laptop 50,000 Total Benefits 109600 Cost to Company=Gross Salary + Benefits6,75,000 + 109600=7,84,600 Benefits would also vary from company to company. In some Laptop may not be provided. In some cost of cubicle would be added. For example: If rent of office space is Rs 200 per sq ft and then a cubicle of 6 feet by 8 feet (i.e48 square feet) would cost Rs. 9,600 per month, or Rs. 1,15,200 per year. Which can be added to your CTC. Please note CTC varies from company to company.

9-23

DID YOU KNOW?

The word salary has come from Latin salrium based on salrius which means pertaining to salt. The word appeared in 1350-1400. In those days, salt , regular ordinary table salt, was a prized and valuable commodity. It was money given to Roman soldiers to buy salt. The phrases the salt of the earth or worth your salt refer to the high value of salt.

In the business world, everyone is paid in two coins: cash and experience. Take the experience first; the cash will come later.

-HAROLD SYDNEY GENEEN