Case 4 Prof.

Madhu Bahl

You have been assigned the responsibility of payroll administration of

4 employees in your branch office. The salary structure is as follows:

►Basic Salary

►Conveyance

►HRA = 60% of Basic ( Percentage value 60% to be taken from cell

C25 )

►LTA = 20% of Basic ( Percentage value 20% to be taken from cell

C26 )

►Employee’s Contribution to PF = 8.33% of Basic

►Company’s Contribution to PF = 8.33% of Basic

►Mediclaim Insurance
If Basic <= 2500 (Rs 500 per month)
If Basic <= 10000 (Rs 1000 per month)
If Basic > 10000 (Rs 2000 per month)

►Gratuity à One month’s basic salary for each completed year of

service, claimable at the time of retirement.

►Performance Incentives 5% of Basic ( Percentage value 5% to be taken from

cell C28 )

►You have to keep track of leave deduction which is calculated as:

[(Basic Salary * 2) + Conveyance] * No of leaves / 30

►You have to keep track of advances taken by an employee over

which the company charges monthly compounded interest at
discounted rate as follows:

If loan amount less than total amount of gratuity accumulated [4% per
annum]
If loan amount less than 70% of total salary drawn till date [8% per
annum]
If loan amount exceeds above [12% per annum]
Interest Amount is calculated by multiplying the Loan Amount with the Interest
Rate per month.

►You have to prepare a system to calculate

 Gross Salary Package for each month =
Basic Salary + Conveyance + HRA + LTA + Company’s
Contribution to PF + Mediclaim + Gratuity + Performance
Incentive

Net Salary Package for each month = Gross Salary – Gratuity

Tax
[Basic Salary + Performance Incentive – (leave deduction)/2]
* tax%

Tax% Annual Net

30% 0-50000
40% 50001-100000
50% 100001-200000
60% 200001-

Total Payable Salary for each month =

Net Salary – Employee’s contribution to PF – Company’s
contribution to PF - Tax – Leave Deduction – Return on
advance – Interest Amount

Create an Excel Worksheet with the following columns and enter

formulas in the cells to calculate the Total Payable Salary. Enter values
in the cells which are underlined.

Employee Number
Basic Salary
Conveyance
HRA
LTA
Employee’s Contribution to PF
Company’s Contribution to PF
Mediclaim Insurance
Leaves
Leave Deduct
Gratuity
Accumulated Gratuity
Performance Incentive
Gross Salary
Net
Tax
Loan
Interest Amount
Return on Advance
Total Payable Salary
Salary Drawn till Date