Understanding Standard Salary Structure For A Salaried Employee

Most of us know the joy of finally getting a job after months of job hunting and giving interviews. When you receive your offer letter, it usually mentions terms like CTC, basic salary and allowances. What do these things mean and how will they affect what your final take-home amount is?

Let’s begin with CTC or Cost to Company, which is the total remuneration package offered to an employee. The CTC will reflect all direct and indirect benefits and also your saving contribution to PF, if applicable.

The most crucial direct benefit, of course, is the basic salary which is the base income you will be paid. This also determines the amount of your other benefits. Base salary is usually around 40-60% of your total package and depends on your designation, industry and company.

Other Allowances

In addition to the base salary, there are a variety of allowances provided to cover your various expenses which is a part of your CTC. The most common ones are House Rent Allowance(HRA), Leave Travel Allowance(LTA) and Transport Allowance. HRA is provided to meet the cost of a rented house where the employee resides. LTA covers expenses incurred on travelling domestically, while on leave (this can sometimes include expenses for family members, too). Transport allowance covers expenses incurred during your commute to and from your workplace. Your company policies will determine which of these are made available to you and also the amount.

Reimbursements are also made available in certain organizations, these may be to cover expenses like telephones, newspapers and books, petrol etc. This amount is usually not received with the salary but on the submission of bills and other documents. Sometimes this is a part of your CTC, depending on the organization.

Your company may also have a bonus system wherein an amount is paid to you over and above your salary. This may depend on many factors including employee performance and company performance. Companies can decide when and how much bonus is paid, some choose a fixed amount while others have a more flexible, variable amount.

Deductions and Contributions

Some companies do provide group insurance but the deduction policies differ from place to place. While you enjoy the cover of a group insurance policy, the premium amount is deducted from your salary and is included in your overall CTC.

Another important component in your CTC breakup is your Provident Fund (PF) contribution. PF is a government-backed scheme that helps you save for retirement. This investment is made by both, you and your employer every month and is usually calculated based on your basic salary and transferred directly into your PF account.