Understanding Salary Breakup: Meaning and Key Components

What is the meaning of Salary breakup? 

Salary breakup is defined as the detailed structure of the various components in an employee’s salary. Generally, the salary of an employee consists of different components, such as CTC, basic salary, allowances, insurances, and so on.

Components of a Salary Breakup:

CTC is the abbreviation of Cost of Company. It is the entire amount spent on an employee by a corporation. It also involves a wide bracket of the pay package that an employee is offered. Here are some components of CTC that helps in salary break-up. 

• Basic Salary: Bonuses, as well as incentives, are not included in the basic wage.
• Allowances: It is a sum of money given by an employer to their workers in terms of meeting service criteria.  HRA (House Rent Allowance), Medical, and other allowances are the most popular.
• Bonus: A bonus is a payment provided to an individual in exchange for outstanding service or productivity.
• Provident Fund: The Provident Fund (PF) is a system that is beneficial after a worker retires. All salaried employees are covered by this investment strategy.
• Gratuity- It is the amount paid by organization to employees after 5 or more years of service. The payment is made as per The Gratuity Payment Act 1972.
• Insurance- Most of the organization’s provides insurance to their employees to promote health and well-being of employees. A small amount is usually deducted by some companies as insurance amount.

How is salary breakup determined?

The salary breakup varies from employee to employee. Some important factors that determines an employee’s salary breakup are:

• Education and experience level
• Type of Industry they belong to
• Location of the job and cost of living
• Skillset that the employee possess and demand for that skill