Jun 9 / Upturn

Negotiated Gross Salary breakdown

What makes up an employee's gross salary?

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Most employees negotiate a net salary at the point of hiring, and so they have no idea what happens to their gross salary before it becomes net. For those that like to negotiate gross, some of them still don't know what makes up that gross – they just ask because they'd like to know the difference between the gross and the net. Some even think that this difference is just tax alone.

There is however, a method to the breakdown of an employee's negotiated gross salary. Whenever employers negotiate a figure with a prospective candidate, it's usually from a breakdown they are working with. This breakdown is from the payroll sheet. And whenever an employee succeeds in negotiating a figure higher than what the employer hoped, there is some work that goes on in the payroll sheet to adjust that breakdown.

Let's see what this breakdown is:

An employee's total negotiated gross salary is constituted of the following:

  • Basic Salary
  • Housing Allowance
  • Transportation Allowance
  • Other Allowances
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The first three, Basic Salary, Housing Allowance, and Transportation Allowance, commonly known as BHT, are mandated by law to be part of an employee's gross salary. So every employer has this.

Other allowances however, are left to the employer's discretion. This includes any other allowance that a company provides its staff depending on their policy. Some companies have allowances such as meal allowance, utility allowance, entertainment allowance, data subscription allowance, wardrobe allowance, communication allowance, and so on and so forth.

Whatever the allowance that a company provides apart from BHT, they must all add up to 100%. However, the general rule is that the BHT makes up about 60-70%, while the rest of the allowances can take up the remaining 30-40%.

With this, employers can now calculate how much they want to allot as BHT and for other allowances. So the more the other allowances, the lesser the percentage for each, and vice versa.

If you'd like to know how an employer adjusts the differences in what they had in mind versus what the employee negotiated and still make up a 100%, sign up for our Payroll course where this is explained explicitly with the legal Acts that back it up. Plus, you get a free Payroll template to compute your entire payroll for your organisation.


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