LTA gets the employee a tax benefit once in a block of two years — and so the hullabaloo.

But before you distribute LTA to staff like WhatsApp jokes, know this: it's on you to validate that the employee hasn't already claimed the benefit in the running block at a previous employer; that they actually consumed privilege (earned) leave for the period claimed; and that the travel genuinely happened and the bills are real. Now multiply that by every employee who'll claim LTA, and you've just discovered the liability of authorizing those claims. A few years later — when that employee is long gone and the Tax Commissioner calls you over for tea (things are changing) — you might be asked to prove the authenticity of a cab booking for someone whose name you can't even recall.

I know. You want to drop this component already.

So while you're relooking at your salary structure, a few more items to reconsider:

  1. Medical and travel allowances that enjoy tax benefits today may lose them — a standard deduction has been brought in precisely to let you do away with these.
  2. There isn't much left that's tax-efficient anymore. Paying the tax is now clearly the most efficient route.

So here's the recommendation: keep it simple and sweet — Basic, HRA, DA, and live happily ever after. Three not a clean number? Make Basic inclusive of DA and get to Basic + HRA.

Worried that a high Basic inflates PF and the rest? Add a Special Allowance — which has nothing special in it, just plain bulk money. It's the closest thing to a safe haven an employee gets. So three isn't bad after all: Basic + HRA + Special Allowance.

Now fire that compensation consultant.

A parting gift: send "Probation" to the deep freeze. It's stale and vestigial, and it makes you look old. In the AI era, where the best people have options and judge you fast, a clean, modern, fair structure says more about you than you think.

Here — get plugHR to simplify your life.

Originally published on the plugHR blog.