Employee Compensation Basics: What Every Employer and Employee Must Know

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By greytHR
2 minute read ● January 02, 2024
Employee Compensation Basics

Everybody knows that the Indian salary structure has multiple components that affect an employee's overall compensation package. To attract and retain top talent, organizations need to design an effective salary structure that adheres to the relevant laws.

greytHR invited Dr. Sanjeev Kumar Chauhan, Director ‒ HR, Pepe Jeans India Limited, to a Parichay ‒ Ask the Expert session to decode the Indian salary structures for the benefit of both employers and employees.

This blog post spotlights the most common aspects HR pros and employees need to know about employee compensation in India.

Minimum Wages:

You should ensure that you not only give your employees minimum wages but also provide living wages so that they can experience a good quality of life. You should also understand that the government keeps revising the minimum wages based on the cost of living index. Even the new wage code will have an impact on the wages of employees. So, be aware of its provisions as well.

Working Hours & Overtime:

Your employees must be aware of their official working hours and the rules governing them. They should also be responsible enough to be productive during these hours. As the employer, you must also enlighten them about their eligibility for double wages when they have to work overtime.

Salary Components:

As per the law, there are some basic deductions to be made for PF, PT, ESI, bonus, etc. Therefore, it is critical to get these calculations right for making accurate salary payouts. Sometimes, some employees might request an increase in their take-home salary. In this case, you may have to make adjustments to the salary components for the benefit of the concerned employees. Yes, this has to be done without violating the law.

Leave Entitlement:

Leave is a mandatory benefit provided by all employers. Although it is non-monetary, it matters a lot for employees. Some companies offer additional types of leave as a gift. Birthday leave and marriage leave are just two examples. There are many more.

Employment Contract:

Both employers and employees must be aware of all the provisions of the applicable employment contracts. Since there are different types of contracts, like regular employment, fixed-term, part-time, consultancy, etc., it's a good practice to enlighten the employees to avoid conflicts and legal issues. Even the salary structure and tax components are likely to be different in each category.

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