pay packet

7/30/2019 Pay Packet

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PAY PACKETModule 3


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PAY PACKET

Pay packet - Wages enclosed in an envelope fordistribution to the wage earner.

With a pay package totalling $8.8 million, or Rs 49crore, the boss ofGenpact, NV Tyagarajanwas thehighest-paid chief executive in India's IT services

and BPO industryin 2011.
http://economictimes.indiatimes.com/topic/Genpacthttp://economictimes.indiatimes.com/topic/IT%20serviceshttp://economictimes.indiatimes.com/topic/BPO%20industryhttp://economictimes.indiatimes.com/topic/BPO%20industryhttp://economictimes.indiatimes.com/topic/IT%20serviceshttp://economictimes.indiatimes.com/topic/Genpacthttp://economictimes.indiatimes.com/topic/Genpact


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PAY PACKET

ANNUAL: USD 400,000.00 ANNUAL: USD 4,800,000.00


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LIONEL MESSI

Annual: USD 39,000,000.00Monthly: USD 3,250,000.00

Weekly: USD 780,000.00Daily: USD 156,000.00

Forbes May 2012: $39 millionFrance Football March 2012: $33M euro

Forbes 2011: $32 millionFrance Football March, 2011: 31million euro wages andendorsementsForbes April 21, 2010: $20million,Forbes May 2012 $39 million


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GENERAL COMPONENTS OFCOMPENSATION

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 creativecontribution

Amount guarantee for old age


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FORMS OF COMPONENTS

Above components could be grouped into 2forms:

Statutory components of compensation(Components that are essential as per thelegislations)

Obligatory components of compensation

(bind the employee with the company)


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BREAK UP OF COMPONENTS OFCOMPENSATION

Compensation package=Basic+DA+HRA CCA(City compensatory allowance)

+Conveyance +Additional Perks & Fringe


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BASIC

As the name suggests, this forms the very basis ofsalary. This is the core of salary, and many othercomponents may be calculated based on this

amount. (Provident Fund : 12% of Basic)

It usually depends on ones grade within thecompanys salary structure. It is a fixed part ofones compensation structure.


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DEARNESS ALLOWANCE (DA)

It takes care of the price inflation that affectsthe purchasing power of the employees.

It is a regular and continuing part of thecompensation package that gets changedaccording to the price increase.


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FIXATION OF DA

For the employees of PSUs, Governmentsthrough the Wage Board and/or the PayCommissions fix this component periodically

based on the CPI (Consumer Price Index) tosatisfy the real values of wage or salary.


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CONSUMER PRICE INDEX (CPI)

A theoretical price index that measuresrelative cost of living over time.

Tokyo 294 (highest)

Bangalore 55Delhi 64


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HRA (HOUSE RENT ALLOWANCE)

Takes care of the cost of living and providesextra money to meet the housingaccommodation expenses so that the

employee can maintain his/her status.


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FIXATION OF HRA

The wage board or pay commission fixes HRAin the government sector, and in the privatesector it is fixed by the employers depending

upon the wage/salary policy and the capacityto pay.

HRA : 50% of Basic for Major Cities (i.e.)Chennai, Delhi, Mumbai, Bangalore etc40% of Basic for all other locations


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CCA (CITY COMPENSATORY ALLOWANCE)

In the same region, the rental rates may varyaccording to the ranking of the city such asurban, metro, or class A, B, C etc. To meet

the expense of cost of living in differentgrades of the city, employer includes CCA incompensation package.


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ANNUAL BONUS

Bonus is the most expected component ofcompensation, especially when an employeestays with the organization for more than a

year and expects recognition of his/hercontinuous efforts throughout the year to letthe organization earn and grow.


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FORMS OF ANNUAL BONUS

Customary bonus: Commitment of org defined in theirpolicy, such as ex-gratia payment (One-time extrapayment in addition to normal pay, made out ofgratitude or courtesy or in recognition of a special

contribution), attendance bonus, productivity bonusetc which cannot be claimed as a right but depends onthe companys policy and plans.

Profit based bonus: Payment of the share of profit orextra earning achieved through the efforts of theemployees.


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ALLOWANCES

Project allowance is offered to the employees sent toimplement any project outside the works and tomotivate him/her to be away from the family.

Shift allowance is to encourage an employee to workin shifts such as employees of call centres oroutsourcing agencies.

Washing allowance helps the employees to maintainneatness and cleanliness without losing their realearnings.


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CONVEYANCE ALLOWANCE

Conveyance allowance is paid to theemployee to compensate the expensesincurred by the employees on travelling.


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WHAT IS CTC?

Cost to company: Total cost incurred to hire, maintain, retain theemployees


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DIFFERENCE BETWEEN CTC & TAKEHOME SALARY

Cost to company (CTC) is the total costthat an employee is incurring in a company.

Gross Salary is the one which you seeevery month. But this is before anydeduction.

Net Salary is what an employee get to

his/her hand after deductions.(this is thetake home salary)

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


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Example Lets see an example explaining the salary. An arbitrary

salary break up is given below (Note: salary structurevaries 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


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Benefits vary from company to company. Example of benefits forthe 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 andthen 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 addedto your CTC. Please note CTC varies from company to company.


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DID YOU KNOW?

The word salary has come from Latin salriumbased on salrius which meanspertaining to

salt. The word appeared in 1350-1400. In thosedays, salt , regular ordinary table salt, was aprized and valuable commodity. It was moneygiven to Roman soldiers to buy salt. The phrases

the salt of the earth or worth your salt refer tothe high value of salt.

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-HAROLD SYDNEY GENEEN

In the business

world, everyone

is paid in twocoins: cash andexperience. Takethe experiencefirst; the cashwill come later.

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