Salary Structures

A salary structure is a template that groups salary components (earnings and deductions) into a predefined compensation package. Rather than configuring each employee's salary from scratch, you create salary structures for different employee grades or roles, then assign the appropriate structure to each employee.

This chapter covers creating salary structures, adding components with amounts and percentages, assigning structures to employees, and managing CTC breakdowns.

What You Will Learn

• What a salary structure is and why it matters
• How to navigate to the Salary Structures section
• How to create a new salary structure
• How to add components with fixed amounts or percentages
• How to assign a salary structure to an employee
• How CTC (Cost to Company) breakdown works
• How to manage multiple structures for different employee grades
• How to edit existing structures
• How changes to structures affect payroll

Prerequisites

Required: Salary components must be configured before you can create salary structures. See Chapter 26: Salary Components — Earnings & Deductions. You must have an Administrator role.

What Is a Salary Structure?

A salary structure serves as a template that defines:

• Which salary components are included in an employee's compensation
• The default amount or percentage for each component
• The overall composition of the CTC

Think of it as a blueprint. The structure defines the shape of the compensation; the individual employee assignment defines the actual amounts.

Example: A "Grade B — Senior Engineer" salary structure might include:

Navigating to Salary Structures

To access salary structures:

1. Click Settings in the left sidebar.
2. Select Salary Structures (or navigate to Payroll > Salary Structures).

The Salary Structures page lists all existing structures with their name, description, and the number of employees assigned to each.

Creating a New Salary Structure

To create a salary structure:

1. Navigate to Settings > Salary Structures.
2. Click Add Salary Structure.
3. Enter the structure details.
4. Add salary components to the structure.
5. Click Save.

Structure Fields

Adding Components to the Structure

After entering the basic details, add salary components:

1. Click Add Component.
2. Select a component from the dropdown (only active components appear).
3. Specify the value:
   • For fixed components: Enter the default monthly amount.
   • For percentage-based components: Enter the percentage and the base component.
4. Repeat for all components that should be part of this structure.
5. Review the component list and click Save.

Step-by-Step Example: Creating a Standard Structure

Let us create a salary structure for a CTC of INR 6,00,000 per annum (INR 50,000 per month):

1. Navigate to Settings > Salary Structures.
2. Click Add Salary Structure.
3. Enter:
   • Name: Grade B — Standard
   • Description: For confirmed employees in Grade B with annual CTC of INR 5-7 LPA.
4. Add the following components:

5. Click Save.

Monthly Breakdown:

Tip: The "Special Allowance" component is commonly used as a balancing figure — the amount that makes up the difference between the gross pay target and the sum of all other fixed/calculated components.

CTC Breakdown

CTC (Cost to Company) represents the total cost the organization incurs for an employee. It includes:

• All earnings (what the employee receives)
• All employer contributions (PF Employer, ESI Employer, Gratuity provision)
• Any other benefits

CTC = Gross Pay + Employer Contributions

Viewing the CTC Breakdown

When you assign a salary structure to an employee with specific amounts, Udyamo HRMS displays the CTC breakdown showing:

1. Annual CTC — Total yearly cost
2. Monthly CTC — CTC divided by 12
3. Monthly Gross Pay — Sum of all earnings
4. Monthly Net Pay — Gross minus employee deductions
5. Monthly Employer Costs — PF Employer, ESI Employer, Gratuity, etc.

Assigning a Salary Structure to an Employee

A salary structure becomes effective only when assigned to an employee. The assignment creates EmployeeSalaryComponent records that link each component to the employee with specific amounts.

Assignment Steps

1. Navigate to the employee's profile.
2. Go to the Salary (or Compensation) tab.
3. Click Assign Salary Structure (or Edit Salary).
4. Select the salary structure from the dropdown.
5. The components from the structure are pre-filled with default values.
6. Adjust individual component amounts as needed for this employee.
7. Enter the Annual CTC if you want the system to calculate the breakdown automatically.
8. Click Save.

Customizing Component Amounts

While the salary structure provides default values, you can override any component amount at the employee level. Common reasons for overrides:

Warning: When you override a percentage-based component with a fixed amount at the employee level, the component no longer auto-adjusts with Basic Pay changes. You will need to update it manually during salary revisions.

Multiple Salary Structures for Different Grades

Most organizations maintain several salary structures aligned with their employee grading system. Here is a typical setup:

When to Create a New Structure vs. Override

Editing a Salary Structure

To modify an existing structure:

1. Navigate to Settings > Salary Structures.
2. Click on the structure name.
3. Update the name, description, or component configuration.
4. Click Save.

Impact of Edits on Existing Assignments

Warning: Editing a salary structure does not retroactively change the salary of employees already assigned to it. To update existing employees after a structure change, you must edit each employee's salary assignment individually or perform a bulk update.

Salary Revisions

When an employee receives a salary increase (e.g., during annual appraisals):

1. Navigate to the employee's profile > Salary tab.
2. Click Revise Salary (or Edit Salary).
3. Update the CTC or individual component amounts.
4. Set the Effective Date for the revision.
5. Click Save.

The system records both the old and new salary details, maintaining a history of salary revisions for each employee.

Bulk Salary Revisions

For annual appraisal cycles affecting many employees:

1. Navigate to Payroll > Salary Revisions (or use the bulk update feature).
2. Upload a file with the revised CTC/component amounts per employee.
3. Review the changes.
4. Set the effective date.
5. Confirm the bulk revision.

Tip: Schedule salary revisions to take effect on the first day of a payroll month. Mid-month revisions require pro-rata calculations, which add complexity.

Salary Structure and Payroll Calculation

During payrun processing, the system uses the employee's salary assignment (derived from the salary structure) to calculate payroll:

1. Gross Pay = Sum of all earning components (using amounts from the employee's salary assignment).
2. Pro-rata adjustment = If the employee has LOP days, the gross pay is proportionally reduced.
3. Deductions = Each deduction component is calculated based on the adjusted gross (or Basic, depending on configuration).
4. Net Pay = Gross Pay - Total Deductions.

For details on the payrun process, see Chapter 28: Running Payroll — The Payrun Process.

Best Practices

1. Name structures clearly. Include the grade level and a brief descriptor (e.g., "Grade C — Mid-Level Staff"). This makes it easy to select the right structure when onboarding new employees.
2. Keep the number of structures manageable. 3 to 6 structures cover most organizations. Too many structures create maintenance overhead.
3. Use Special Allowance as a balancing figure. This simplifies CTC calculations — set Basic, HRA, and other components first, then let Special Allowance absorb the remainder.
4. Review structures during annual appraisal cycles. Ensure the default values in each structure reflect current compensation bands.
5. Document your CTC breakdown logic. Maintain a reference document (or spreadsheet) that maps how CTC is split into individual components for each grade. This is invaluable during salary negotiations and offer letter preparation.
6. Test with a sample employee. Before assigning a new structure to many employees, assign it to one test employee and run a trial payroll to verify the calculations.

What Comes Next

With salary components and structures configured, the next step is to run actual payroll. Proceed to Chapter 28: Running Payroll — The Payrun Process.