Now, most organizations follow Cost to Company concept to account total compensation of employees. Once the organization decides to hire an employee, discussion will happen on compensation part and thereafter the Cost to Company (CTC) package. Once the CTC amount is finalized, compensation structure will be prepared and shared with the employee as part of the offer letter or appointment order.
Salary structure is the sum total of compensation agreed upon as payment to the employee for fulfilling the employment terms and includes components such as Basic, Conveyance and as many components the organization wishes. HR needs to put in place a promotion and increment policy in the organization.HR needs to be aware of salary trends and salaries being paid in similar organizations. This would be helpful in determining the salaries to be paid to existing employees and new joinees.
Whenever a new employee joins the organization, HR department shares compensation structure of the employee and the date of joining to Payroll Processor. Therefore, every month, this task is a checklist item for Payroll Processor.
Apart from this, when employee becomes confirmed or gets promotion, there can be changes in compensation structure. HR then shares revised compensation structure with effective date to Payroll Processor. For Payroll Processor, this is another checklist item, month on month. HR needs to work with Line Managers to identify employees who can be promoted. Typically this is during the Performance Appraisal process. This could also happen during attrition or business expansion process.
HR needs to do the transactions relating to promotion and salary increments to employees. Increment letters are to be issued and Payroll advice to be given.