Salary structures: basic, HRA, and allowances

A salary structure is the template of earning lines payroll will calculate from: typically basic pay, house rent allowance (HRA), and other allowances the employer actually uses. How you split cost-to-company (CTC) into those lines is employer design until a binding rule you have reviewed says otherwise. This article does not treat a 50% basic split as settled Indian labour-code fact. It is not legal or tax advice. Pending SME review; remains a draft.

HRA as a payroll earning is not the same as HRA exemption in income tax. Exemption conditions and computations belong on official Income Tax Department materials for the year in question. This page will not quote exemption rules as current law. Dayzen payroll calculates gross, HRA, and allowances as configured; it does not file returns or bank-pay. Statutory meaning of EPF, ESI, professional tax, and TDS as calculation components — without rates — is on India statutory payroll calculations.

CTC is a packaging conversation, the structure is the monthly machine

Offer letters often lead with an annual CTC. Payroll does not pay “CTC.” It pays named monthly (and sometimes one-off) earnings, then subtracts named deductions. If the offer PDF and the payroll template disagree on line names or on what sits inside CTC, the first payslip becomes a negotiation.

Write the structure as:

• Which lines are monthly recurring earnings.
• Which lines are variable or annual (bonus, incentives) and whether they sit in CTC talk but not in every month’s gross.
• Which employer contributions you show in CTC for conversation but do not pay as cash in the month.
• Which deductions the employee will see on the slip that were never in the CTC headline.

Employees who subtract “CTC ÷ 12” from net and call the difference theft are usually missing this packaging. The fix is a one-page map, not a larger headline number.

Basic pay: a line, not a slogan

Basic is the earning many other rules and habits attach to. Offices use it as a reference for other allowances, and statutory configurations often use it as part of a base. None of that lets this article announce a nationwide percentage of CTC that basic “must” be.

You will hear round splits in vendor decks and blogs, including a fifty-percent basic story tied to wage-definition or labour-code talk. Those sources disagree with each other, and they are not a gazette sitting in this project. Do not configure 50% (or any other round split) because it sounded like law. If a reviewed instrument requires a method for your establishment, implement that method after SME sign-off. Until then, choose a split you can explain in the offer and in the template, and keep it stable unless you have a dated revision.

Changing basic mid-year without an effective date and a written reason will move every dependent allowance and every statutory base that reads basic. Treat it as a compensation event, not a payroll tweak.

HRA: an allowance on the template

HRA in payroll is a named earning. Some structures set it as a percentage of basic; some as a fixed rupee; some as a grade table. Those are design choices. Location on the employee record may matter to how you intend HRA to work (metro versus other is a tax-conversation people have). Do not paste an exemption formula into the payroll SOP and call it configuration.

For tax treatment of HRA, point payroll, finance, and employees to current Income Tax materials and to whatever declaration process you actually run. Payroll can calculate an HRA earning and, where you configure it, a tax-related computation. It cannot certify that an exemption claim is correct. Dayzen does not file the employee’s return or the employer’s TDS return as a claimed product.

If you do not pay HRA (for example a structure that uses other allowance names, or housing provided under a different arrangement), do not keep an HRA line at zero “for show.” Empty lines become tickets and bad YTD.

Other allowances: name them like you will print them

Special allowance, conveyance, telephone, children education, and similar labels appear in Indian office templates. Use the names you will print on the payslip and in the offer annex. Do not invent a statutory character for a line because the name sounds official.

Write, for each allowance:

1. Is it monthly, variable, or reimbursed against bills (reimbursement may not belong in this earning template at all).
2. Does LOP apply to it.
3. Does it feed any statutory base you have configured — as your reviewed mapping, not as a blog grid.
4. Who may change it (HR compensation versus payroll adjustment).

A “flexible basket” that employees reallocate between lines is a product of policy and system support. If you offer it, freeze reallocations before the pay period you will calculate, or you will rework statutory bases after freeze.

What the structure must share with the employee master

The template is useless if it is attached to the wrong person, wrong entity, or wrong location. Employee management should hold identity, joining date, status, and location assignment. Payroll reads those facts. A transfer that changes city or entity without an effective date will apply the old structure to the new life, or the new structure to the old month.

Grade, designation, and employment type (confirmed, probation, contract — as you use those words) often pick a structure. Keep the picker on the master, with history. Side sheets of “everyone on structure A except these ten” are how month-end close invents earnings.

Bank details and tax regime declarations are inputs to payment and withholding. They are not earning lines. Do not hide a regime choice inside an allowance name.

Statutory bases without numbers

EPF, ESI, professional tax, and TDS calculations, where they apply, read earnings according to configured bases. The structure is where you decide which lines exist to be read. This page will not publish wage ceilings, contribution rates, or “basic plus DA” as if they were copied from a current gazette.

When you add a new allowance, ask the reviewer: does this line enter a statutory base, or is it outside, and is that choice documented. Silent inclusion is a surprise deduction. Silent exclusion is a surprise later when an auditor or consultant uses a different definition.

Dayzen payroll can calculate those statutory components and the earning lines (basic, HRA, allowances) you configured. It does not tell you the split is lawful. It does not file.

Revisions: dated events, not quiet edits

Annual increments, promotions, and structure redesigns need an effective date, a before/after of lines, and a who-approved. Mid-month revisions need a written rule: full month at new structure, prorated days at old then new, or next-cycle only. Pick one per entity and keep it.

Do not edit last month’s structure to fix this month’s offer error. Correct the master going forward and use a named adjustment if you owe arrears. Quietly changing history rewrites YTD and every comparison the employee still has as a PDF.

What employees should be able to reconcile

Give a short map at offer and at each revision:

• Annual CTC packaging (what is cash monthly, what is annual, what is employer contribution talk).
• Monthly earning lines that will appear on the payslip.
• That deductions (statutory and other) will reduce net and are not always visible in the CTC headline.
• Where to read the payslip after release, and that the PDF is calculation, not a filing receipt.

If you cannot explain a line in one sentence, it should not be on the template. Mystery “other allowance” buckets are how trust in the structure dies even when the rupees are consistent.

SME-gated questions this page refuses to close

Wage definition for various labour statutes, whether a particular split is required, commencement and applicability of labour codes, and current HRA exemption arithmetic are not settled here. Secondary articles disagree. Official gazettes, notifications, and Income Tax materials — plus counsel for your entities — are the sources. Until SME review, keep structures explainable and internally consistent.

Do not configure payroll from a competitor’s sample CTC PDF. Do not tell candidates that Dayzen “sets 50% basic because of the new wage code.” That sentence is exactly the claim this draft forbids.

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Design earning lines you can print: basic, HRA, other allowances, with a CTC map that admits packaging. Do not treat a 50% basic split as labour-code fact. Do not quote HRA exemption as current law; verify on Income Tax materials. Dayzen calculates gross, HRA, and allowances; it does not file or bank-pay. Attach the template to the same employee identity and location the master holds. This article remains a draft pending SME review.

When two group companies share branding but not structures, keep two templates. A single “Dayzen-looking” PDF with the wrong basic is still the wrong salary machine. Stability and named revisions matter more than looking like a round percentage someone saw on a blog.