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Notes :- Important
Calculations of Payroll

Calculation of Salary
Calculation of employee's CTC salry
Meaning of CTC
The full form of CTC is Cost To Company, which means the salary amount,
which includes the total amount paid to any employee from his employer and
other benefits, in which the amount of direct and indirect benefits received
by the employee from the employer. is also included
CTC is the cost to any company that it has to bear in exchange for employing
that employee under it. CTC is the payment made by the employer to the
employee in return for employment under him, which includes the amount
paid to the employee by the employer for direct and indirect benefits in
addition to the salary paid to the employee. Thus CTC is the total payment
cost to be bear by the employer on an employee.
CTC includes basic salary to be paid by the employer, allowances given by the
employer to the employee such as house allowance, medical allowance,
education allowance, conveyance allowance and other indirect benefits
given by the employer to the employee such as PF, ESIC , Bonus, Gratuity etc.
Main components of CTC
The most important component of CTC is the basic salary, which is the basic
amount given to the employee according to his qualifications, it does not
include any benefit given by the employer.

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Dearness allowance
In CTC, if dearness allowance is paid to the employee by the company, then
the amount of dearness allowance will be included in the CTC.
HRA
If the benefit of house allowance is given by an employer to the employees
working under him, then the amount of house allowance paid by the
employer to the employee will also be included in the CTC.
Medical Allowance
If the employee is given the benefit of medical allowance by the employer,
then that amount of medical allowance will be included in the amount of
CTC.
Conveyance Allowance
The benefit of conveyance allowance is given by most of the companies to
their employees.
The amount of conveyance allowance paid by the employer to the employee
is also part of the amount of CTC and that amount is also included in the
amount of CTC.
Travel allowance.
The benefit of traveling allowance is given to the employees working by the
company, this traveling allowance is called LTC / LTA. The amount of traveling
allowance paid by the employer to the employee is also included in the CTC
payment.
Mobile allowance
At present, mobile telephone allowance is paid to the employees by almost
all the companies. The amount of mobile allowance given by the company to
the employees is also included in the amount of CTC.

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Health Insurance
If insurance or health insurance is done by the employer for the employees
working under him and the premium amount of that insurance is paid by the
employer, that amount will also be included in the amount of CTC.
Contribution of PF or deduction of PF.
According to the PF Act, if the PF Act applies to any establishment then every
employee who is covered under the PF Act. A contribution of 12% of the basic
salary DA of the employee is deposited in his PF account by employer. On
behalf of the employee, the amount of 12% of Basic Salary DA is also
deposited in the in his PF account. In this way, a total of 24% of the basic
salary DA of the employee is deposited in the PF account of the employee.
This 24% amount to be deposited in the PF account of the employee is added
to the amount of CTC.
Bonus payment amount.
If the Bonus Act is applicable to an establishment, then according to the
provisions made under the Bonus Act, it is mandatory for the employer to
give bonus to the employee working in that establishment. The bonus
amount paid by the employer to the employee is included in the amount of
CTC.
Gratuity amount.
If the Gratuity Act is applicable in an establishment, then according to the
provisions made under the Gratuity Act, it is mandatory for the employer to
pay the amount of gratuity to the employees working in that establishment.
The amount of gratuity to be paid by the employer to the employee will also
be included in the amount of CTC.
Income tax
If the amount of salary paid to an employee working in any establishment is
covered under the Income Tax Act, then the amount of income tax on the
income of the employee will be included in the amount of CTC.

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Professional Tax
The Professional Tax Act is not applicable in all the states of India, but the
amount of professional tax paid on the income of the employees working in
the states where the Professional Tax Act is applicable will also be included
in the amount of CTC paid to the employee. will be included.

Calculation of CTC
If the monthly basic salary of an employee is fixed at ₹ 15000, then the CTC
salary of that person will be calculated as follows.
Basic Salary ₹15000
HRA 50% of basic salary
15000×50/100=7500
Education Allowance - 2500
Travel Allowance - 3000
Mobile Allowance - 2000
Special Allowance – 30000
PF employee - 12% of basic salary Rs 1800
PF employer - 12% of basic salary Rs 1800
ESIC Contribution from Employee - .75% of Gross Salary Rs.225
ESIC Contribution from Employer - 3.25% of Gross Salary 1125 Rs.
Bonus Amount - Minimum 8.33% of Basic Salary or 8.33 583 of maximum
Rs.7000
Total Monthly CTC = 35533
Total Annual CTC = 35,533×12 = 426396

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Calculation of Gross Salary

What is Gross Salary?

The gross salary received by an employee means the amount of salary which
he receives without any deduction.

In other words, gross salary is the amount of salary which includes basic pay
to be paid by the employer, allowances given to the employee like house
allowance, medical allowance, education allowance, conveyance allowance
and any other kind of allowances which are paid by the employer.

Gross salary calculation.

Gross salary is calculated according to the formula given below.

Gross Salary = Basic Pay + Dearness Allowance + House Allowance +

Medical Allowance + Conveyance Allowance + any other allowance, if
given by employer.

Which amount is included in the calculation of gross salary of

employee

1) Basic salary and dearness allowance paid by the employer to the

employee are added to the gross salary.
2) The allowances paid by the employer are added to the gross salary.
Such as house allowance, education allowance, medical allowance,
conveyance allowance or any other kind of allowance which is given
by the employer to the employee.

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Gross salary Calculation

If the basic salary of a person is fixed as ₹ 10000, then the gross salary of that
person will be calculated as follows.
Basic Salary ₹10000
HRA 50% of basic salary
10000×50/100=5000
Education Allowance - 1700
Travel Allowance - 1000
Mobile Allowance - 800
Special Allowance- 1500
Total Monthly Gross Salary - 20,000

Calculation of net salary.

What is Net Salary?
Net salary is the salary amount that the employee receives after making all
deductions from the gross salary given by the employer.
In other words, after deducting all kinds of deductions from the employee's
gross salary, the amount received by the employee or deposited in his bank
account is called net salary. In this way, it can be said that net salary is the
amount that the employee receives in his hands after deducting all types of
deductions.
Net Salary = Gross Salary - Deductions
or

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Net Salary = Gross Salary - PF Contribution - ESIC Contribution - Professional

Tax - TDS - or any other deduction

Net Take home Salary Calculation

Gross Selery - Deductions
The following deductions will be made from 20,000 gross salary
Amount of PF Employee's contribution - 12% of monthly basic salary - 1200
Amount of ESIC Employee's Contribution - Rs.75 of employee's monthly gross
salary - Rs.150
20000- 1200- 150 = 18650
Employee Net take home celery = 18650

Calculation of monthly salary of the

employee.

If the monthly salary of a worker is calculated on the basis of 26 days, then it

will be done as follows.
For example, if the monthly gross salary of X employee is ₹15000 and was
present for 18 days in the month of September, the salary will be calculated
as follows.
15000/26 × 18 = 10,384.62
If the employee is part of the management, then his daily salary will be
calculated on the basis of 30 days which will be done as follows.
For example, if the monthly gross salary of an employee is ₹25000 and he is
present there for 18 days in the month of September, then his monthly salary
will be calculated as follows.

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25000/30 × 18 = 15000
Here, while calculating the salary, we have to keep in mind that if PL, SL, or
CL is used by the worker during the days of absence, then the money for
those days cannot be deducted from the employee's monthly salary. Even
money for absence on the day of National Holiday cannot be deducted from
the salary of the worker.

Calculation of Besic salary.

What is the basic salary?
The basic salary received by an employee means the amount of salary which
does not include the allowances and other benefits paid by the employer to
the employee.
Basic Salary = Gross Salary - Allowances paid by the company to the employee
- Any other kind of benefits paid by the company to the employee.
In this way, to find the basic salary of any employee, his gross allowancesis
deducted from the salary given by the company to the employee and any
benefits given by the company to the employee.

Calculation of HRA
HRA is one of the main allowances of the employee's salary. This is the main
salary allowance given by companies to their employees. It is given to the
employees to pay the rent of their house. According to the Income Tax Act,
the amount of HRA is exempted from income tax, although a limit has been
prescribed for exemption of income tax on HRA. If the amount of green is
within the exemption of income tax, then exemption from income tax will be
provided on that amount.

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How much can HRA be

Generally, the amount of HRA allowance is kept at 50% of the monthly basic
salary received by the employees.
For example
If the monthly basic salary of an employee is ₹ 22000, then the amount of
HRA allowance given to that employee can be kept up to 50% of his monthly
basic salary.
In this way
22000 ×50/100 = 11000
The amount of HRA allowance of the employee can be kept up to ₹ 11000.

Exemption from income tax on the amount of HRA.

As per the provisions made under the Income Tax Act, the HRA allowances
paid to the employee on a certain amount are exempted under the Income
Tax Act. On the amount of HRA allowance, whichever is the lowest,
exemption will be given under the Income Tax Act.
The amount of house rent actually paid by the employee, equal to 10% of the
monthly basic salary received by the employee shall be deducted from the
amount of rent to be paid by the employee.
1. If the monthly basic salary of the employee is ₹ 22000 and the amount
of house rent paid by the employee is ₹ 10000, then 10% of the
amount of 22000 will be deducted from the amount of 100000 of the
house rent of the employee.

22000×10/100 = 2200

10% of the monthly basic salary will be Rs 2200 deducted from the
house rent amount of 10000.

10000- 2200 = 7800

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According to the Income Tax Act, income tax exemption will be

available on the amount of ₹ 7800.

2. If the employee resides in a metro city, then he will get a deduction on

the amount of HRA equal to 50% of the amount of his monthly basic
salary.

If the employee resides in a non-metro city, then the amount of HRA

child equal to 40% of the amount of monthly basic salary received by
him will be exempted from income tax.

3. If the employee is given HRA allowance by the company, then the limit
of exemption on the amount of HRA allowance given to the employee
will not be more than ₹ 15000 i.e. up to the maximum amount of ₹
15000 that the employee gets from the company. Exemption from
Income Tax Act.

Calculation of paid weekly leave.

According to the provisions made under the Factories Act, it is mandatory for
the workers working in the factory to be given a paid weekly holiday on the
seventh day after the working day of 6 days. This weekly holiday will be paid.
For example:-
If a worker joins the job on 5th September, he will be given the first paid
weekly off on 11th September. Similarly, the second paid holiday will be given
on 18th September and the third paid holiday on 25th September. In this way
a total of 3 paid weekly holidays will be given to that employee in the month
of September. Similarly, that employee will be given paid weekly leave on the
seventh day after every 6 working days. In every month that employee will
get 4 paid weekly off.

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Calculation of monthly PF contribution.

How the amount of PF contribution is calculated.
In the amount deposited in the PF account, 12% of the basic salary DA of the
employee is contributed by the employee and 3.67% is contributed by the
employer.
For example, if the basic salary DA of an employee is Rs 10000, then the
amount of contribution deposited in this account on behalf of the employee
will be calculated as follows.
Calculation of the amount deposited by the employee in the PF account.
Calculation of amount to be credited in Account No. 1 of PF Challan.
For example, if the basic salary DA of an employee is Rs 10000, then the
amount of contribution deposited in this account on behalf of the employee
will be calculated as follows.
10000 × 12 / 100 = Rs 1200
In this way, the amount deposited in the PF account on behalf of the
employee will be Rs 1200.
This amount will be deposited in account number 1 of PF challan.
Calculation of the amount deposited by the employer in the PF account.
For example, if the basic salary of an employee is DA 10000 rupees, then the
amount of contribution deposited in this account on behalf of the employer
will be calculated as follows.
10000 × 3.67 / 100 = Rs 367
In this way, the contribution made by the employer in the PF account will be
₹ 367
This amount of ₹ 367 will be deposited in account number 2 of PF challan.

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Calculation of Contribution of Pension

Scheme Amount
How the amount of pension scheme deposited in PF account is calculated.
Calculation of amount to be credited in account number 10 of PF challan.
For example, if the basic salary DA of an employee is Rs 10000, then the
amount of contribution deposited in this account on behalf of the employee
will be calculated as follows.
10000 × 8.33 / 100 = Rs 833
In this way, the amount to be deposited in the pension scheme by the
employer in the PF challan will be ₹ 833.
This amount will be deposited in account number 10 of PF challan.

Calculation of Monthly PF Challan.

How many types of accounts are there in PF challan.
There are 4 types of accounts in PF challan. Earlier there were five accounts
of PF Challan. In which the fifth account number was 22, the administrative
fee of the EDLI scheme was deposited in this account, but the administrative
fee on EDLI has been abolished by the EPFO from April 1, 2017. Due to this
reason only four accounts are left in the PF challan. which is the following
Account number - 1
Account number- 2
Account number- 10
Account No.- 21

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What amount is deposited in the account number 1 of PF Challan.

PF contribution is deposited in account number one. In this account,
contribution of 12% PF amount is deposited by the employee and 3.67
percent by the employer.
Which amount is deposited in the account number 2 of PF Challan.
The amount of administrative fee on PF amount is deposited in account
number 2 of the challan. This amount is .50 percent of the PF wage amount.
Which is fully paid by the employer.
What amount is deposited in the account number 10 of PF Challan
The pension scheme amount is deposited in the account number 10 of the
challan, which is 8.33 percent. The entire contribution of 8.33% of the
pension scheme amount is deposited by the employer.
Which amount is deposited in the account number 21 of PF challan.
The amount to be deposited under the Employer Deposit linkd Scheme is
deposited in the account number 21 of the PF challan. This amount is .50
percent of the basic salary.

Calculation of amount to be credited in Account No. 1 of PF

Challan.
For example, if the basic salary DA of an employee is Rs 10000,
then the amount of contribution deposited in this account on
behalf of the employee will be calculated as follows.

10000 × 12 /100 = Rs 1200

In this way, the amount deposited in the PF account on behalf
of the employee will be Rs 1200.
This amount will be deposited in account number 1 of PF
challan.

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Calculation of the amount deposited by the employer in the PF

account.
For example, if the basic salary of an employee is DA 10000
rupees, then the amount of contribution deposited in this
account on behalf of the employer will be calculated as
follows.
10000 × 3.67/ 100 = Rs 367
In this way, the contribution made by the employer in the PF
account will be ₹ 367

This amount of ₹ 367 will be deposited in account number 1

of PF challan.

Calculation of administrative charges on PF amount deposited in

PF account.
Calculation of amount to be credited to account number 2 of PF
challan.
For example, if the basic salary DA of an employee is Rs 10000,
then the amount of contribution deposited in this account on
behalf of the employee will be calculated as follows.
10000 × .50 /100 = Rs 50
This amount will be deposited in account no 2 of PF challan.

• How the amount of pension scheme deposited in PF account is

calculated.

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• Calculation of amount to be credited in account number 10 of

PF challan.
For example, if the basic salary DA of an employee is Rs 10000,
then the amount of contribution deposited in this account on
behalf of the employee will be calculated as follows.

10000 × 8.33 /100 = Rs 833

In this way, the amount to be deposited in the pension

scheme by the employer in the PF challan will be ₹ 833.

This amount will be deposited in account number 10 of PF

challan.

• Calculation of the amount of Employee Deposit Gender

Insurance to be deposited in the challan.
• Calculation of amount to be credited in Account No. 21 of PF
Challan.
For example, if the basic salary DA of an employee is Rs 10000,
then the amount of contribution deposited in this account on
behalf of the employee will be calculated as follows.

10000 × .50 / 100 = Rs.50

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In this way, the amount to be deposited under Employee

Deposit Linked Insurance Scheme in PF Challan will be ₹ 50,
this amount will be fully contributed by the employer.

This amount will be deposited in account number 21 of PF

challan.

Calculation of administrative fees to be

done in monthly challan of PF.
Calculation of administrative charges on PF amount deposited in PF
account.
Calculation of amount to be credited to account number 2 of PF challan.
For example, if the basic salary DA of an employee is Rs 10000, then the
amount of contribution deposited in this account on behalf of the employee
will be calculated as follows.
10000 × .50 / 100 = Rs 50
This amount will be deposited in account no 2 of PF challan.
Calculation of contribution to be made under Monthly Pension Scheme.

Calculation of the amount of Employee Deposit Gender Insurance to be

deposited in the challan.
Calculation of amount to be credited in Account No. 21 of PF Challan.
For example, if the basic salary + DA of an employee is Rs 10000, then the
amount of contribution deposited in this account on behalf of the employee
will be calculated as follows.

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10000 × .50/ 100 = Rs 50

In this way, the amount to be deposited under Employee Deposit Linked
Insurance Scheme in PF Challan will be ₹ 50, this amount will be fully
contributed by the employer.
This amount will be deposited in account number 21 of PF challan.

Calculation of pension to be received by

the employee under the pension scheme.
Calculation of pension of the employee under the pension scheme
Calculation of pensionable salary.
To calculate the pension of the employee under the Employees' Pension
Scheme, the pensionable salary of the employee will be first determined, the
salary received by him in the last 5 years or last 60 months of the service
period of the employee will be considered as the pensionable salary of the
employee.
If an employee has completed 20 years of service, then the average monthly
salary of that salary till 5 years before the date of his leaving the job or
retirement will be considered as pensionable salary.
Calculation of the qualified service of the employee.
Eligible service of the employee under the Employees' Pension Scheme is the
total period of service rendered by the employee in it. Under the Employees'
Pension Scheme, it is mandatory for the employee to serve at least 10 years
to get the pension, if the service of 9 years and 8 months is done by the
employee, then his service period will be counted as 10 years. Similarly, if an
employee has rendered service of 15 years and 9 months, then his period of
service will be considered as 16 years. If the service period of an employee is
12 years and 2 months, then his period of service will be considered as 12
years.

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If a person does a job in different companies or institutions, then

If an employee is employed in different companies or institutions and during
this period his continuous contribution is made under the Employees'
Pension Scheme, then that period will be considered as the period of
continuous service of the employee. For example, if an employee has worked
for 6 years in one company and 6 years in another company and while
working in both the companies, he has contributed continuously under the
Employees' Pension Scheme, then the service period of the employee is 12.
year will be considered.

Formula for Calculation of Employee

Pension
Pensionable Salary of the Employee* Period of Pensionable Service of the
Employee/70
As we mentioned above that the pensionable salary of the employee will be
considered as the salary on behalf of the monthly salary received by the
employee 60 months before the date of his leaving the job or his retirement.
And the period of employee pensionable service will be considered as the
total service period rendered by the employee.
For example, if the average monthly salary of an employee for the last five
years is Rs 12,000 and the total period of service rendered by him is 20 years,
then the amount of his pension will be calculated as follows.
12000*20/70= Rs 3428
In this way, the amount of monthly pension that the employee will receive
will be ₹ 3428.

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Calculation of Sum Assured under EDLI

This scheme, the basic salary + Darelans Allounce of the employee for the
last 12 months is provided 35 times, earlier this amount used to be 30 times,
then in this amount ₹ 175000 is added as bonus and earlier bonus amoun
was 150000.

EDLI Insurance Calculation Formula

A. example, if the basic salary + dearness allowance of an employee for the
last 12 months, the amount of is ₹ 15000, then the amount of insurance will
be calculated as follows.

15000 * 35 = 5,25000

5,25000 + 1,75000 = 7,00000

Total sum insured = 700000

Calculation of ESIC Monthly Contribution

On which salary of the employee the ESIC contribution will be calculated.
The ESIC contribution will be calculated on the monthly gross salary of the
employee as per the provisions made under the ESIC Act.
What is the gross salary limit of the employees for ESIC contribution.
For this, the limit of the gross salary of the employees has been fixed at ₹
21000 i.e. the employees whose monthly gross salary is up to ₹ 21000, those
employees will be covered under the ESIC Act and the ESIC contribution will
be deducted from the monthly gross salary of those employees. If the
monthly gross salary of an employee is more than ₹ 21000 then that
employee will not come under the purview of ESIC Act and ESIC contribution
will not be deducted from the monthly gross salary of that employee.

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In case of handicapped employees, the monthly wrath salary limit for ESIC
contribution is ₹ 25000 i.e. if the monthly gross salary of a disabled employee
is up to ₹ 25000 then ESIC contribution will be deducted from his monthly
gross salary. If the monthly gross salary of a disabled employee is more than
₹ 25000, then that disabled employee will not come under the purview of SC
Act and ESIC contribution will not be deducted from his monthly salary.

What is the monthly ESIC contribution?

As per the amendment made under the ESIC Act in the year 2019, the
monthly ESIC contribution is 4% of the total monthly gross salary of the
employee. Therefore, a total of 4% amount will be deducted from the
monthly gross salary of the employee and deposited as monthly ESIC
contribution.

What is the percentage of the employee's contribution in the monthly ESIC

contribution?
After the amendment made in the ESIC Act in the year 2019, the contribution
of 0.75% of the monthly gross salary of the employee will be done by the
employee.
What is the percentage of employer's contribution in monthly ESIC
contribution?
After the amendment made in the ESIC Act in the year 2019, 3.25% of the
monthly gross salary of the employee will be contributed by the employer.

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Formula to calculate monthly contribution

of ESIC.
Formula to calculate total monthly contribution to ESIC.
Employee's monthly gross salary × 4/100
For example, if the monthly gross salary of X employee is Rs 18000 then his
monthly ESIC contribution will be calculated as follows.

18000×4/100 =720

In this way a total of Rs 720 will be deducted as ESIC contribution from the
monthly gross salary of X employee.
Formula for calculation of monthly contribution on behalf of the employee
iemploye
For example, if the monthly gross salary of X employee is Rs 18000 then his
monthly ESIC contribution will be calculated as follows.

18000×0.75 /100 =135

Thus the monthly ESIC contribution to be made by the employee will be ₹135.
Formula to calculate monthly contribution from employer in ESIC.
For example, if the monthly gross salary of X employee is Rs 18000 then his
monthly ESIC contribution will be calculated as follows.

18000× 3.25 /100 =585

In this way the amount of monthly contribution to be made by the

employer will be ₹585.
Thus the total monthly contribution of ESIC will be as follows
135 585 = Rs 720
The employee's total monthly contribution to ESIC will be ₹720. Which will
be deducted from the growth salary of the employee.

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Gratuity Calculation Formula

A. (Employee's last salary) x(15/26)x How many years worked in the company
For example, if an employee has worked in a company for 12 years, then his
last basic salary + DA is ₹ 20000, then his gratuity amount will be calculated
as follows
(20000) x (15/26) x 12 = 1,38,461
If an employee X has worked in a company for 12 years or has been employed
for 12 years and after 12 years he leaves that company, then the amount of
gratuity he will receive is calculated as follows: in this way will be done. The
amount of gratuity will be calculated on the last monthly basic salary,
dearness allowance paid to the employee at the time of leaving the job. If
the last basic salary received by the employee is Dearness Allowance 22000,
then the amount of gratuity to be paid to him will be calculated by the
following formula.
Last Basic Salary received by the employee × Years of employment done by
the employee ×15/26
Thus the amount of gratuity will be as follows.
Rs 22000×12×15 /26=1,52,307
The amount of gratuity received by the employee is Rs 1,52,307.
If the employee is employed for 12 years 7 months, then the time of his
employment will be considered as 13 years and if the employee works for 12
years and 5 months, then the time of his employment will be considered as
12 years, thus more than 6 months. Time in excess will be treated as equal to
his next year and time less than 6 years will be treated as equal to his previous
year.
While computing gratuity, it is specially kept in mind that if an employee has
worked for more than 6 months, then it will be counted as 1 year, for
example, if an employee has worked in a company for 5 years. And has
worked for 7 months, then it will be considered as 6 years and the gratuity of
that employee will be calculated on the basis of 6 years.

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Calculations Of Bonus
Limit for Payment of Bonus
The minimum bonus limit has been fixed at 8.33 percent under the Payment
of Bonus .According to Section 31A of this Act, the maximum limit for
payment of bonus has been fixed at 20%, under which the bonus related to
productivity is also included.

What is the minimum bonus amount fixed under the Provision

Bonus Payment
Under the Provision of Bonus Payment the minimum bonus amount has been
fixed at 8.33% of the salary of an employee earned in a financial year. Under
the Bonus Payment Act, the maximum limit for bonus payment has been set
at 20%.

Minimum Working Days for Payment of Bonus

According to the provisions made under the Payment of Bonus , if any
employee has worked in any establishment for at least 30 days in a financial
year, then he is entitled to get bonus from that establishment.

Inclusion in Basic Salary for Calculation of Bonus

DA allowance is also added to the basic salary of the employee while
computing the bonus. Apart from this, no other allowance is taken into
account while computing the bonus.
Salary Limit for Bonus Calculation
The limit of payment of bonus has been fixed at 7000, earlier this limit was
3500, which was increased to 7000, if the minimum wage in any state is more
than 7000, then the bonus will be calculated on the minimum wage.

If it is assumed that your basic salary + DA = 7000, then your bonus will be
calculated as follows Monthly Bonus = 7,000* 8.33% = 583.1
Yearly Bonus = 583.1 *12 = 6,997.2

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What is the bonus calculation formula.

Income earned by an employee during a financial year multiplied by 8.33 /
100
Maximum bonus payment limit.
As per the amendment made in 2015 under the Provision of Payment of
Bonus.the maximum wage limit for payment of bonus has been increased
from Rs. 10000 to Rs. 21000 monthly. Therefore, it means that according to
the Bonus Payment Act, only those employees are eligible whose monthly
salary does not exceed 21,000/-.

Calculation of Overtime Payment

Rate of Overtime Payment
According to the provisions made under the Factories Act, if an employee
works more than 9 hours in a day and if he works more than 48 hours in a
week, then that employee will be entitled to overtime payment for the extra
working hours This payment will be made at twice the normal rate of wages.
Thus, if an employee is worked by an employer for more than 9 hours in a
day and more than 48 hours in a week, the employer will pay the employee
for overtime at twice the normal rate of wages for the hours worked. will
have to pay.
As per the provisions made under the Factories Act, the overtime amount
will be paid to the employee at the rate of twice the basic wages dearness
allowance received by the employee.

Calculation of the amount of overtime Payment.

To calculate the payment of overtime amount, first the daily income of the
employee will be calculated. whose formula is
Employee's Monthly Basic Salary + Dearness Allowance/26
For example, if the monthly basic salary of X employee is ₹ 10500, then his
daily basic salary dearness allowance will be calculated as follows.

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BM LEGAL HR

10500/26 =403.84
ie 404 rupees
Now we will find the hourly income of the employee. Following is the formula
to calculate employee's hourly income
Besic salary + dearness allowance/8
In this way the basic salary per hour of the employee will be calculated as
follows
404/8=50.5
i.e. 50 .5 rupees
The employee's hourly income will be ₹50.5
Overtime Payment
Basic Salary of Per hour + DA× Overtime hour ×2
50.5×2 = 505
Total Overtime Payment of Employee = 505
In this way, if 5 hours extra work is done by him, then he will be paid overtime
at the rate of double the normal wage for five extra hours per hour i.e. 101
rupees for that employee for extra 5 hours work. will be paid at the rate of

Calculation of Leave Encashment

What are the types of holidays usually given to employees

Privilege leave or Earned leave

Privilege leave is also called earned leave which is earned by the employee
by doing work himself. PL is given by the company to the employee on the
basis of the number of days worked by him.

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BM LEGAL HR

According to the provisions made under the Factory Act Act, if an employee
works for 20 days, then he will get one PL every 20 working days. On this
basis, each employee gets PL for one and a half days in a month and a total
of 18 days in a year. PL is also called earned leave because it is earned by the
employee by working.

PL is mandatory.

According to the provisions made under the labor laws, it is mandatory for
every employer to give earned leave to the employees working under him.

The PL is carried forward to the next year.

The specialty of PL leave is that this leave can be carried forward to the next
year i.e. if an employee does not use all his PL in any 1 year and the PL leave
of that employee remains after the end of the year. then the remaining PL
gets carried forward to the next year.

that employee can use his remaining PL in the next year. However, based on
the rules, the PL to be carried forward to the next year has been limited.

PL can be done in case.

Another feature of PL is that these leave can be converted into monetary

form or can be In Cash. If an employee does not use his PL till the end of the
year, the employee can convert his remaining earned leave into monetary
form, if he so desires. Under this, the amount of PL balance of that employee
can be received in cash for that number of days. For example, if an employee

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BM LEGAL HR

is left with 5 pl even after the end of the year, he can get 5 days basic salary
in cash from the company in lieu of 5pl.

If the employee wants, he can encash his remaining PL only during his service
and if he wants, he can get encashment done after leaving the job or at the
time of retirement.

Casual leave

Casual leave is another type of leave given to employees. Casual leave is

taken by the employees on account of some casual work. The main purpose
of CL is that employees can take CL if there is any emergency work, usually
CL is used by the employees for one or two days' work leave.

Sick Leave

what is sick leave

Sick leave is also a type of leave given to the employees, which is taken by
the employees for not coming to work due to illness or ill health.

In other words When the employee wants to take leave due to ill health, he
can take sick leave.

Holidays

Holidays are those holidays given to the employees, which are mandatory for
any employer to give to the employees. Holidays can be of the following
types:-

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BM LEGAL HR

National holidays

National holidays consist of holidays which are observed in connection with

a national festival. For example, 15 August is a national holiday on the
occasion of Independence Day, 26 January is a national holiday on the
occasion of Republic Day, and 2 October is a national holiday on the occasion
of Gandhi Jayanti. It is mandatory for any employer to give leave to the
employees on these national holidays. No deduction can be made by the
employer from the salary of the employee in lieu of national holiday.

Weekly off

As per the provisions made under the Factories Act, it is necessary for every
employer to give a weekly holiday to the employees working under him after
every 6 working day. That is, it is mandatory for the employer to give 1 day
leave to the employees after working for 6 days, the holiday is called weekly
holiday. No deduction of any kind can be made by the employer from the
salary of the employee for this weekly Holiday.

Calculation of encashment of PL Leave

The benefit of encashment can be availed by the employee only in lieu of PL
in all types of leave available to the employees.

ie

The PL leave available to the employees is the only such leave which can be
encashed. Employee can get cash benefit in lieu of PL leave. If even after the
end of the year, if the PL leave balance is left in the account of the employee,

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BM LEGAL HR

then the employee can get the cash payment for the next year in lieu of the
remaining PL leave.

When can the employee get the benefit of encashment in lieu of PL?

Any employee, if he so desires, can get the benefit of encashment of PL leave

remaining in his account at the end of the year after the end of the year. The
employer has to pay the employee's PL holidays.

And if the employee so desires, he can carry forward the remaining PL

holidays in his account to the next year and when the employee leaves the
job or retires, at the same time can get cash benefit in lieu of the remaining
PL holidays in his account. Is.

For example

If the number of PL leaves received by an employee X in the year 2022 is 18

and if 10 PL leaves are utilized by the employee. And even after the end of
the year if he is left with 8 PL then the employee will be entitled to get the
payment in lieu of the remaining PL leave.

The formula for calculating the encashment of PL leave of the employee will
be as follows

Monthly Basic Salary + DA /26 × Number of PL holidays remaining.

Employee's daily income × Number of PL holidays left by the employee.

Now if there are 8 holidays left in the employee's account at the end of the
year, then the encashment of those holidays will be calculated as follows.

If the monthly basic salary DA of X employee is Rs.8000 then

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BM LEGAL HR

8000/26×8=2461.53

In this way the employee will get the benefit of encashment of Rs 2461.53 in
lieu of his remaining 8 PL holidays.

will also be exempted from income tax.

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BM LEGAL HR

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