Consolidated Salary
Table of Contents
What is Consolidated Salary?
Consolidated salary is a type of payment arrangement in which an employee receives a fixed salary without any further breakups, such as basic pay, dearness allowances, HRA, bonus, and more. In other words, it signifies that the employee’s total salary is consolidated into a single amount. The payroll cycle for this type of salary is usually carried out weekly or monthly.
This salary is often used in companies where there is no separation between base salary and other allowances. Instead, companies provide employees with a single amount of their total compensation for all components. This arrangement is helpful for both employees and managers as it streamlines the pay structure for employees and makes it simpler for HR to manage their salaries.
Example
If an employee's salary is 40,000 Rs per month, they will receive this amount without any breakup. However, this type of salary arrangement is eligible for tax deductions such as PF, ESIC, TDS, professional tax, and more.
Let us see the difference between gross salary and consolidated salary:
For Rs 40,000:
| Normal Gross Salary | Consolidated Salary |
|---|---|
| Earning | Total earnings = ₹40,000 |
| Basic salary + DA (50% of gross salary) ₹20,000 | NA |
| HRA = ₹7,000 | NA |
| Transport allowances = ₹1,250 | NA |
| Medical allowances = ₹1,690 | NA |
| Other allowances = ₹10,060 | NA |
| Deductions | Deductions |
| PF (up to ₹15,000) = ₹1,800 | PF (up to ₹15,000) = ₹1,800 |
| TDS (approx) = ₹125 | TDS (approx) = ₹125 |
| Professional tax (varies as per state) = ₹200 | Professional tax (varies as per state) = ₹200 |
| Inhand salary = ₹37,875 | Inhand salary = ₹37,875 |
A 12% PF deduction will be made for employees with a basic salary of Rs 15,000 per month or less. However, if the employee's basic salary exceeds Rs 15,000, the PF contribution is not mandatory.
In the above example, we have deducted 12% from 15000. Here, the employee's basic salary is 20,000; thus, it is not mandatory to deduct PF from salaries exceeding 15000.
Basically, this consolidated salary is much more similar to the gross salary. The only difference between them is that consolidated pay has no salary breakup.
Frequently Asked Questions
1. Is consolidated salary and consolidated pay the same?
Yes, consolidated salary meaning is the same as consolidated pay.
2. What is the difference between consolidated pay and basic salary?
Basic salary is a part of gross salary, whereas consolidated pay includes other components, like HRA, travel allowances, medical allowances, benefits, etc, in a single salary without any further breakups.
3. Are consolidated salary employees eligible for any deductions?
Consolidate salary employees are eligible for tax deductions such as:
- PF: If the employee's salary is less than or equal to 15,000, then 12% of PF will be deducted.
- ESIC: If the employee's salary is equal to or less than 21,000, then ESIC will be deducted.
- Income tax: Employees have to pay income tax according to the latest tax slab limits, the same as regular salaried employees.
4. What are the benefits of consolidated pay?
Since it includes all the components of the salary in a single amount, it gives employees the benefit of knowing the exact salary they will be getting. It also simplifies payroll processing for the HR manager.
5. Is consolidated pay better than regular salary?
It totally depends on the company. A consolidated income offers certainty and simplicity, but it might not be as appealing as a regular salary regarding perks, benefits, and incentives.
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