Salary Structure Designer

The ideal basic salary is typically 40-50% of CTC. A higher basic means higher PF contributions and gratuity, which is better for the employee's retirement savings. However, it also means higher employer costs. Under the new labour codes, basic should be at least 50% of CTC to align with statutory requirements.

CTC (Cost to Company) is the total cost the employer bears, including gross salary plus employer contributions like PF and gratuity. Gross salary is what the employee receives as monthly pay before deductions — Basic + HRA + Special Allowance. In-hand salary is gross salary minus employee PF and professional tax.

HRA is calculated as a percentage of basic salary — typically 50% of basic for metro cities (Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Pune, Hyderabad, Ahmedabad) and 40% for non-metro cities. The HRA amount can be partially tax-exempt under Section 10(13A) of the old tax regime.

Special Allowance is the balancing figure in a salary structure. After fixing Basic, HRA, and employer contributions, the remaining amount needed to reach the agreed CTC becomes Special Allowance. It is fully taxable under both tax regimes.

Employee PF is 12% of basic salary, capped at ₹1,800/month (12% of ₹15,000 ceiling). Employer contributes 12% as well — 8.33% to EPS (capped at ₹1,250) and 3.67% to EPF. Gratuity is 4.81% of basic (15/26), payable after 5 years of continuous service.

SignHR lets you configure multiple salary structure templates with different Basic/HRA ratios, PF applicability, and tax regime preferences. Once set, payroll runs automatically compute all components, deductions, and generate payslips and compliance reports.