This document discusses various components of employee compensation, including basic salary, allowances, incentives, perks, and benefits. It provides definitions and examples for each category. Basic salary is a fixed amount paid for work performed. Allowances are additional payments for specific needs or expenses. Incentives are performance-linked rewards to improve motivation and productivity. Perks are extra benefits beyond standard compensation. The Payment of Bonus Act of 1965 governs bonus payments in India to reward employee contributions.

1. presented by:
Fazludeen mehar
Hardik bansal

2. Contents
 Basic salary
 Allowances
 Incentives
 Perks
 Benefits

3. Basic salary

4. What is basic salary
 Basic salary is a fixed amount of money paid to an
employee by an employer in return for work
performed. Basic salary does not include benefits,
bonuses or any other potential compensation from an
employer.
 If the appointment of employee is made in pay scale,
their basic salary increases every year and the amount
of basic salary is changed. If the employee is not
appointed in a pay scale, his basic salary remains fixed.

5. Objective of basic salary
 The general objectives of the wage and salary
administration are as follows:
(a) Control of costs
(b) Establishment of fair and equitable remuneration.
(c) Utilization of wages and salaries as an incentive to
greater employee productivity.
(d) Maintenance of a satisfactory public relations
image.

6. What is Allowance?
 A sum of money paid regularly to a person, typically
to meet specified needs or expenses
 Allowance are generally
Calculated on Basic
salary

7. Allowances
 Dearness allowance
 House Rent Allowance
 Conveyance Allowance
 City Compensatory Allowance
 Foreign Allowance
 Helper Allowance
 Medical Allowance
 Tiffin Allowance
 Telephone Allowance

8. Allowances
 Servant Allowance
 Rural Allowance
 Overtime Allowance
 Family Allowance
 Marriage Allowance
 Tribal area Allowance
 Children education Allowance
 Hostel Allowance
 Hill Allowance

9. DA is a cost of living adjustment allowance paid to
Government employees and pensioners in India.
As of June 2012, the Dearness Allowance is calculated
as a percentage of an Indian citizen's basic salary to
mitigate the impact of inflation on people belonging
to the low income group.
The guidelines that govern the DA vary according to
where one lives (for example, whether rural or
urban)..
(DA Rates for the Central Government
Employees)
(July 01, 2013 Dearness Allowance Rate: 90%)

10. HRA is generally paid as component of salary
package. This allowance is given by an employer
to an employee to meet the cost of renting an
accommodation.
Least of following exempt from Tax U/S 10(13A)
1. Residential house in Metro city - 50 % of Salary
Residential house at other place - 40% of Salary
2. Actual House rent allowance received.
3. Rent paid in excess of 10 % of salary.

11. The conveyance allowance is a type of allowance which is
paid to the employees of the state As well as central govt.
employees in order to meet the expenses to come to office
from the residence of the employees
It varies on the basis of the city of posting, distance of the
employees from the residence to office & type of
conveyance used to travel.
CA is exempted U/S 10(14) read with Rule 2BB upto Rs.
800/- p.m.
If person blind or OD then upto Rs. 1600/- P.m.

12. It is an allowance paid by employer to compensate high
cost incurred by employee work in big cities like Delhi,
Mumbai, Bangalore, and other metropolitan cities.
However, it is a fully taxable allowance. i.e. the amount of
this allowance will be taxed with the salary received.

13. This allowance is paid by the Government of India to its
citizen employees for being posted outside the country
and it is not included in total income. It is completely tax-
free U/S 10 (7).

14. Exempt to the extent incurred on helper where such
helper is engaged for performance of official duties.

15. Children Education Allowance Paid for education of
Employee’s children. Exempt up to Rs. 100/- per month
per child up to maximum of 2 child if Expenses made in
India.

16. Children Hostel Allowance Paid for education of
employee’s children. Exempt up to Rs. 300/- per month
per child up to maximum of 2 child if expenses made in
India.

17. Tiffin / Lunch Allowance It is fully taxable. It is given to
employees for lunch as coupons or added as part of salary.

18. Non practicing Allowance This is normally given to those
professionals (like medical doctors, chartered
accountants etc.) who are in government service and are
banned from doing private practice. It is to compensate
them for this ban. It is fully taxable.

19. Overtime Allowance When an employee works for extra
hours over and above his normal hours of duty, he is given
overtime allowance as extra wages. It is fully taxable.

20. It means an allowance payable for the time being to an
employee of any factory or other establishment during
any period in which the establishment is not working, for
retaining his services

21. Medical Allowance is a fixed monthly allowance which
forms a part of Salary. It is paid as a fixed amount which is
determined as per the company’s policy where an
individual is employed and it has no relevance with the
medical expenses incurred.
Medical Allowance is added in taxable income under the
head “Salaries” and it is fully taxable.

22. Money which given by employer is allowed by his or her
company to spend on meals with visitors
In the case of a Government employee (i.e., Central
Government or a State Government employee), the least of the
following is deductible:
 Rs. 5,000/-
 20% of basic salary ; or
 Amount of entertainment allowance granted during the
previous year.

23. Any allowance, which is granted to meet the expenditure
incurred on purchase or maintenance of uniforms to wear
during the performance of the duties of an office.

24. Incentives

25. Incentives
The term INCENTIVES mean, something which
encourages a person to do something. Or the “extra
financial reward/ motivation”.
Incentives is the performance-link reward to improve
motivation & productivity of the employees.
Incentives includes all that provide extra pay for the extra
performance in addition to regular wages for the job.

26. Incentives
 According to burrack and smith, “An incentive scheme
is a plan or programmer to motivate individual for
good performance. An incentive is most frequently
built on monetary rewards, but may also include a
variety of non-monetary rewards or prizes.

27. Why Incentives are Important?
Incentives are considered beneficial to both employers as well as employees
in following ways.
 Workers are likely to work at their best when they are offered monetary
rewards for good performance.
 Provide opportunity for hard-working & ambitious employees to earn
more.
 To improve work-flow, work methods & man – machine relation ship.
 To bring employee involvement to make employee innovative.
 Incentives are the sound technique of improving productivity.
 Help to improve discipline and industrial relation.
 The cost of supervision are reduced.
 To obtain desired result.

28. The basic from of incentives are as follow.
 Bonuses :- is an incentive payment that is given to an employee beyond his
normal standard wages. It is generally given at the end of the year & does
not become part of the basic pay.
The payment of bonus Act 1965 is applicable to every factory or
establishment in which 20 or more person are employed in an accounting
year.
 Merit pay :- is a reward based pay on haw well an employee done the
assigned job. Higher the performance Greater will be the reward.
The payment is depend on individual employee’s performance.
 Commission for sales people :- is paid on the basis of sales made by the
employee, through different plan. Such as
Salary plan :- where new salesman is appointed, is unable to generate new.
Commission plan :- where organization is totally based on sales of their
product.
Combination of both :- is the most frequently used method.
Basic forms of incentives.

30. Halsey Plan
 Halsey Plan:
 By F. A. Halsay
 Under this plan, a standard time is fixed on basis of
past performance record.
 A worker who completes his job within or more than
the standard time is paid a guaranteed time wage at
the normal rate.
 A bonus usually 50% of the time saved is paid to a
worker who completes his job in less than standard
time.

31. Halsey Plan
Illustration:
Standard Time (S) = 8 Hrs
Time taken (T) = 6 Hrs
Rate of Wages (R) = 20/Hr
Bonus (P) = 50% of the time saved
Total wages (W) = (T x R) + (50 % x (S - T) x R)
= (6 x 20) + (50 x (8 – 6) x 20)/100
= 120 + (0.5 x 2 x 20)
= 120 + (1 x 20)
= 120 + 20
= Rs.140

32. Rowan Plan
 Rowan Plan:
 By D. Rowan in 1901
 This is a modified form of Halsey Plan.
 Under this plan, a minimum time wage is guaranteed
to every worker at the normal rate.
 A standard time is determined in advance.
 The bonus is that proportion of the wages which the
time saved bears to the standard time.

33. Rowan Plan
 Illustration:
Let us use the same data given above under Halsey Plan:
Standard Time (S) = 8 Hrs
Time taken (T) = 6 Hrs
Rate of Wages (R) = 20/Hr
Total Wages= (T x R) + {T x R x (Time Saved)}
Standard Time
=(6 x 20) + {6 x 20 x (2)}/8
= 120 + (120 x 1)/4
= 120 + 30
= Rs.150
Note: In this method, Rs. 10 is earned more than the earlier
method (Halsey plan), i.e. Rs. 150 – Rs. 140.

34. Emerson Efficiency Plan
 Emerson Efficiency Plan:
· Under this plan, standard time for a job is
determined scientifically and a minimum time wage is
guaranteed to all workers at the normal time rate.
· Bonus is given at an increasing percentage beyond the
prescribed level of efficiency (*usually 66.67 % of
efficiency).
· Efficiency of each worker is determined by dividing the
standard time by the time taken.
*Efficiency = (Std. Time) x 100/Time Taken
= (8) x 100/12
= 66.67 %

36. Bedeaux Point Plan
Bedeaux Point Plan:
 Under this plan, standard time for the job is set
scientifically and it is expressed in terms of B.
 For instance, a standard time of 240 B means that the job
should be completed within 240 minutes.
 In determining the Bs, the time of operation and the rest
time both are taken into account.
 Minimum time wage is guaranteed to all workers.
 The workers who complete the job within or more than the
standard time are paid at the normal time rate.
 Those who complete the job in less than the standard time
are paid bonus for the time saved.
 Generally, 75% of the wages for the time saved are paid as
bonus to the worker and 25% to the foreman.

38. Taylors’ Differential Piece Rate
Plan
 Taylors’ Differential Piece Rate Plan:
· F.W. Taylor, the father of Scientific Management
devised this plan.
· Under this system, standard task is established through
time and motion study.
· Two piece rates are laid down.
· The lower rate for those workers who fail to complete
the standard task within the allotted time and the higher
rate for those who complete the task within or less than the
allotted time.
· The objective is to provide sufficient incentive to
workers to work hard and achieve the standard.

39. Taylors’ Differential Piece Rate
Plan
Illustration:
Suppose the standard output is 50 units per day. The piece
rates fixed are Rs. 3 and Rs. 4 per unit. Three workers A, B
and C produce 40, 50, 60 units respectively during a day.
Their total wages will be as follows:
A = 40 x 3 = Rs. 120
B = 50 x 4 = Rs. 200
C = 60 x 4 = Rs. 240
In this way, an inefficient worker is penalized as he gets a
lower rate per unit.

40. Merrick’s Multiple Piece Rate Plan
 Merrick’s Multiple Piece Rate Plan:
· This plan was developed to overcome a drawback in
Taylor’s Plan.
· This drawback relates to an abrupt change in piece rate.
· Under it, three graded piece rates are prescribed.
· Workers producing less than 83% of the standard
output are paid at a basic piece rate.
· Those producing from 83% to 100% of the standard
output are paid 110% of the basic piece rate.
· Workers producing more than the standard output are
paid at 120% of the basic piece rate.

42. Gantt’s Task and Bonus Plan
 Gantt’s Task and Bonus Plan:
· Under this plan, standard time for every task is
fixed through time and motion study.
· Minimum time wage is guaranteed to all workers.
· A worker who fails to complete the task within the
standard time receives wage for actual time spent at
the specified rate.
· Workers who achieve or exceed the standard get
extra bonus varying between 20% to 50% of the hourly
rate for the time allowed for the task.

44. Perks
 Perks are employee benefits, usually in addition to
salary and standard employee benefits. The word, perk
or perks, is a short form of the word perquisite which
means incentives, bonuses, extras, or sweeteners. In
use in business, the term perks has come to mean
benefits or extras above and beyond the normal
comprehensive benefits package.

45. Examples of Perks
 Company supplied cars
 Free lunches or beverages
 Company logoed shirts, hats, and other merchandise
supplied at low cost or no-cost
 First choice of vacation schedule
 First chance to work overtime
 Professional association membership
 Conference attendance
 First chance for lateral moves or promotions
 Job openings posted and filled internally before externally
 Flexible schedules
 Telecommuting opportunities
 Office, larger office with window
 Tuition reimbursement
 Cafeteria benefits plan

46. The Payment of Bonus Act, 1965
The Payment of Bonus Act, 1965 is the principal act for
the payment of bonus to the employees which was
formed with an objective for rewarding employees for
their good work for the organization. It is a step
forward to share the prosperity of the establishment
reflected by the profits earned by the contributions
made by capital, management and labour with the
employees.

47. THANKS