When companies conduct talent hunts, they offer a salary package for a certain vacant position, whether in-office or remote venture. The whole package is determined by the salary structure that companies implement to calculate the worth of an employee.
You should know that a handsome salary package is more than the base salary that you are offered by a company. As a beginner, it is normal for into confusion about this term. Therefore, I have compiled a comprehensive guide on what it is, its structure, calculation, and example with my experience.
Allow Me To Proceed!
What is a Salary Package?
A salary package is a group of compassion, bonuses, housing subsidies, leaves per year, commission, and base salary. When employers mention salary, then they often mean your base salary which increases the attention for you to make decisions.
As an employee, you should make sure each of the benefits of the offered position before accepting the proposal as a smart move. Let’s discuss the factors before heading towards its structure:
- Base Salary: Base salary is the amount that an employer pays you monthly based on your role in the industry.
- Commission: Commission is the additional monetary incentive that an employer calculates on your total sales, which depends on your performance.
- Annual Bonus: The majority of employers give their employees annual monetary bonuses to encourage and motivate them for more.
- Double Pay: This is a common factor in a salary package known as 13th month payment. Companies give their employees an extra amount of compassion at the end of the year.
- Annual Leaves: Usually, annual leaves depend on your state, working hours, and other factors that you should confirm in your laws, including sick leaves.
- Additional Factors: Health insurance, staff discounts, on-site childcare, overtime pay, meal reimbursements, subsidising training, and share incentive plan.
What is Salary Structure and How It Is Designed?
A salary structure is a payment formation of your companions that a company offers for a certain role in industry. Companies utilize salary structures to calculate how much they need to pay an employee for an offered position.
A payment structure has different grades and salary ranges as low, medium, and high to pay you the amount. In addition, your academic grades, experience, and several factors determine what salary range you will get.
Factors of Salary Structure
Let’s discuss the factors of salary structure:
- Cost to Company (CTC): CTC is the total compensation of an employee that a company pays to him.
- Basic Salary: Basic salary is the fixed monthly amount on which an employer pays tax and is 50% of CTC for employees.
- Gross Salary: The amount before deducting any taxes and consists of bonus, basic salary, and additional allowances, is called gross salary.
- Net Salary: It is the take to the home amount that an employee receives every month without allowances and tax deductions.
- Allowance: A fully or partially taxable amount an employee receives is called an allowance. For instance, medical allowance, children allowance, and multiple other allowances.
- Bonus: A fixed variable or price that an employee receives from a company above his salary depending on his performance.
- Employee Provident Fund (EPF): 12% of the salary and dearness allowance (DA) of employers who have more than 20 employees and employees who have less pay than $173.21/month, gathered into the employee’s EPF account each month.
- Professional Tax: Employers have to deduct a professional tax from employees’ variable salaries and pay to the state government.
- Gratuity: Gratuity is 4.81% of an employee’s basic salary that he receives after retiring from a company after five or more years. Employers who have 10 or more employees are required to pay a lump sum payment to employees on their retirement known as Gratuity.
How to Calculate Salary Package?
As you have come to so long by discussing salary packages and their structure including their factors, it’s time to know how it is calculated. That’s easy if you are good at math. Here is a simple and easy formula to calculate the exact package.
Total Salary Package = Base Salary + Allowances + Bonuses + Benefits + Perks – Income Tax
According to the salary formula, add your base salary, allowances, bonuses, benefits, and additional perks along with subtracting your income tax to get the total package. All the way this long, you may understand each factor and you just have to add every expense to know your salary package.
Let’s make it more simple:
1. Base Salary
Base salary is the fixed amount which you receive at the end of the month. It is 50% of the CTC without any tax deduction and other affairs, like allowances.
2. Allowances
A partially or fully taxable amount that an employee receives from the company in order to improve his lifestyle. In addition, this amount is also helpful in their hard conditions like medical, schooling, and other situations.
3. Bonuses
Bonuses are the additional payments that an employee receives from the company depending on his performance over the month or year. The majority of companies pay bonuses to their employees at the end of the month by analyzing their performance.
The main purpose of paying bonuses is to enhance their job satisfaction and boost their productivity.
4. Benefits
Whether a company offers you a vehicle or a car rental service to the office and back home, is considered the benefit of your job. As do if your company gives you such benefits, then these advantages will be considered in your salary package.
5. Perks
Paid paternal leaves, sick leaves, and additional paid vacations are considered in your salary package which is known as perks. If you do overtime or late shifts, then the company will also pay you the exact amount additionally according to your overtime sessions with your salary.
Salary Package Example
After discussing on salary package, its structure and calculation, let’s head towards its example to if it exactly works. Of course, it does, but I’ll dive deep. Here is an example of salary:
Contact Information
- Name:
- Position:
- Department:
Financial Compensation
- Salary:
- Hours:
- Overtime:
- Commission:
- Signing bonus:
- Performance bonus:
- Relocation compensation:
- Raises:
Retirement Planning
- 401(k):
- Pension:
- Stock options:
- Profit-sharing:
Benefits
- Health insurance type:
- Health insurance cost to employee:
- Dental care:
- Life insurance:
- Hazard pay:
- Workers’ compensation:
- Disability:
- Medical leave:
- Parental leave:
Time Off
- Vacation:
- Sick time:
- Holidays:
- Bereavement:
- Personal time off:
Other Perks
- Professional development stipend:
- Tuition reimbursement:
- Memberships:
- Transportation vouchers:
- Employee assistance programs:
- Flexible scheduling:
- Childcare:
- Meal plans:
- Telecommuting options:
Closing Note
Well, this is all I know about salary package, its structure, and calculation throughout my personal experience and comprehensive research. This guide will be helpful for both of you, whether you are going to start a business and start talent hunting or an employee to avoid scams.