Payroll is one of the foremost elements whether you will join a company or not. But while negotiating your salary, we focus on increasing that CTC.
While CTC is important for your salary structure, you also pay attention to how much if your take-home salary is increasing.
To know your salary in and out, read on. We will get you started on your journey to understanding your payroll management and the factors that affect it.
You need to ensure that you are up to date with the changes in the salary structure as per your company’s policy and the state taxation laws.
During the induction of any new batch of employees, you will have to educate them on these taxes, but before you do that, you need to also make sure that your salary structure is benefiting both the non-taxable and the taxable bracket of employees.
Generally, CTC has four sides; basic, allowance, prerequisites, and retirement benefits/contributions. Some perquisites can be exempted helping you save money in taxes.
Payroll Methods to Improve Your Payroll Management Process
1. Basic salary and its components
Remember it is always a better trade-off between a higher in-hand salary and a higher taxable salary.
People with lower pay should opt for a higher basic salary with other basics like home rent allowance, conveyance, medical reimbursement, etc.
These salary elements may get taxed to a certain extent. But they make a higher portion of the entire salary.
Employees higher up in the hierarchy get higher packages so their taxable elements are more. Due to this, they get more tax benefits.
2. Importance of Allowance
Certain individuals get a fixed allowance from the income tax department, helping them to bring down their taxations to a great extent.
Although tax benefits are good, you need to keep in mind that a lower in-hand salary is better without tax deduction.
3. Facilities and Advantages
Additional facilities and amenities provided by the employer to the employee aren’t included in the salary.
If the Income Tax Department had this prerequisite as a part of the salary structure, they would be taxed.
That’s the reason you need to pay close attention to the number of prerequisites your employer is providing you.
4. Benefits of Retirement
This is the fourth and most important factor in your pay structure. In that, these savings aren’t short term, these are long term savings that help an individual live a dignified life post-retirement.
While these deductions are important, they cut down the take-home salary to some extent.
So, it is very important to pay attention to such elements while structuring your salary.
5. Long Term & Short Term Goals
While an employee doesn’t have complete control over his or her salary structure, they still can opt for a personalized one.
However, you need to be sure about your long term and short term financial goals before you go ahead and with any kind of changes in your tax structure.
While tax benefits are important to your employees. As an employer, you need to be transparent and let them know your company’s salary structure.
After that, your employees can take a call whether they want to opt for the tax benefits, or not.
After all, transparency is the key to a long-term relationship between the company and its employees.
It is recommended to take advice from an expert payroll management services provider to implement it more efficiently.