CTC = (Basic Salary+DA+all allowances+(employer's contributions towards epf, esi etc)
Gross Salary = basic salary + DA + all allowances
epf is calculated on basic salary and esi on gross or total salary (refer to the relevant acts)
also some companies first decide Gross salary and then calulate the basic salary as a specific % of Gross Salary, while some prefer to first decide the basic salary and then they decide the allowances and hence calculate the gross salary.
Basic salary will be calculated on Gross Salary (almost per month). CTC doesn't indicate salary exclusively. It includes other costs too (Ex : PF Er. Contbtn./ESI Er. Contbt./Profit Bonus/Gratuity/incentive/Uniform Allowance/Medical Reimbursement/Mediclaim&Accident policy/LTA/Subsidies/Interest on Loans & Advances etc.)
Sathish Kumar P.
Gross salary or CTC is a function of Basic pay. (mathematically speaking).
Any change in Basic pay is reflected on Gross Pay or CTC.
Here, Gross Pay and CTC are dependent variables of Basic Pay.
However, small companies, without any well-defined salary structure and compensation system; simply try to offer new candidates Gross Salary higher than what they are getting in their own company (which is logical); and then they work backward and try to retrofit a Basic pay, calculated from the Gross Pay or CTC.
If that is what needs to be done, then it hardly matters, whether one is arriving at the basic Pay from the Gross salary or CTC. In both the cases, basic pay is just an arbitrary figure.
In good and big established companies, Gross Pay and CTC automatically gets calculated from the Basic pay (and the Grade/Job Band) of any employee.
Instead of just fixing Basic Pay randomly, HR's in companies not having any Compensation system, should propose Grade/Job bands and corresponding sets of Basic Pay with annual/performance increments along with a well defined system of Other Allowances, Reimbursements and Perks.
I hope members will prefer to have a well thought-out and well-defined System in place, rather than having an arbitrary system.
I agree with Mr. Sathish. Basic salary is calculated towards Gross monthly salary.
CTC means Cost to Company which includes Bonus, Gratuity, Medical Reimbursement,LTA(Leave Travel Allowance), PF/ESI(Employer Contribution) etc. along with Gross Salary (Basic+DA+HRA+CCA+Tiffin Allw.+Local Conveyence+Special Allow.)
Basic salary varries from 40% - 50% of Gross Salary.(50% in Metro city).