Dinesh Divekar
Business Mentor, Consultant And Trainer
Sr. Manager-hr &ir
Employees Relations & Hr Advisor
Manager Hr
+2 Others

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Dear All,
Is there any law or act prescribes that what is the amount or percentage of total salary or wage is to be Basic wage on which PF is calculated ?
Is there any law or act prescribes that Basic salary should/must be 60% of total CTC ?
Thanks in advance for your support.

From Australia
Dear Vinod,
There is no defined percentage for the break up of gross salary (please make it a point, I am saying gross salary and not CTC). However, once you make a policy, be firm on it forever. You have to follow this policy across the board i.e. from Office boy to the top management officials. You cannot have variation based on designation or age or gender etc.

From India, Bangalore
There is no such law

But, If you are paying very low salary say Rs 4000/ and of this you pay Rs 1000/ as Basic, then authorities are likely to take the entire amount as Basic as it is less than the Minimum wages

We can argue that law does not prescribe, but the law need to be examined in totality and not in fragments.

Let us examine these two scenario

1. Company is restricting PF Contribution to Rs 6500/ as prescribed under PF Act. Assume Minimum Wages in the State where your Company is located is Rs 5500/ Let us assume again that the Company pays Basic of Rs 3000 and DA of 1000 and pay other allowances 4000/ making the total asRs 8000/ as wages. Eventhough there is no legal provision for fixing Basic at a pecentage, here is a case where the Basic plus DA is lower then the prescribed minimm wages. Definitely Authorities will question and insist that dedcut contribution atleast upto the Minimum Wages level.Legally, PF Authorities are not the inspectors for Minimum Wages and we can question their authority.But, legally they can refer the matter to the converned authorities and they in turn can take action.

2. Company is not restricting the contribution to Rs 6500. assume that the Total wage is Rs 20000/ Of this Rs 7000/ is paid as Basic and Rs 2000/ as DA Balance is paid as HRA and Medical Allowance . Percentage of Basic plus DA is lower than 50%. Authorities do not question the percentages here as you already contributing much higher than the legal requirement


T Sivasankaran

From India, Chennai
As Mr.Dinesh said, there is no law prescribing any formula for fixing a ceratin percentage as basic pay and even the Minimum Wages Act does not interfere with the structure of salary so long as the wages paid by you are not less than minimum wages. It is entirely within the realm of the employer to fix the quantum of various components of the salary/wages and no one can insist that P.F contributions shall be paid at least on minimum wages. However the employer shall adopt sound principles of wage fixation, having regard to industry-cum- region formula and the degree of responsibilities, the level of skills required to perform the job etc.

From India, Mumbai
Yes, the legal implications provide us that the basic pay has to be between 30% to 60% of gross salary, 30% being minimum and 60% max. But it is left to the companies to decide whether to fix the basic pay at 30%, 45% or 55 or 60%, it may chose any amount of percentage as basic pay...
Regarding PF, refer EPFO

From India, Bangalore
Dear All,
Most of the times i get myself confused in distinguishing between CTC and gross salary.Would any one please let me know the difference between both by citing examples if possible.
Thanks & regards

From India, Gurgaon
Request you to please tell me that where I'll get the written circular for the same as you stated.

From India, Calcutta
Dear Umesh
Gross salary is a package that you are providing to a employee
CTC is total of Gross salary as well as including employer contribution on PF, ESIC, etc...
let me give you an example:
EMP X = Basic-3000, HRA-1800, Misc Allowance-1800 Gross Salary-6000, Tot_ded on PF, ESIC, PT-505, NET Salary-5495, EPF 13.61% of Basic Salary-409, ESIC 4.75% of Gross Salary-285, Cost to company(CTC)-6694
Inthis case Gross salary is 6000 and CTC is 6694
Hope this will help you to clear your concept.

From India, Calcutta
Sorry, I can not go in search for the circulars, but I will try to get reference......... Basic salary is one of the components of CTC, and this component amount will be calculated as 50% on CTC. This % will vary from company to company. Minimum 30% and Maximum 60%. It depends as per the company norms.
From India, Bangalore
There is no such law or circular. Many of us in the forum keep saying that there is no such Law or circular and I do not know where from people get such views.
Please go through all postings. This subject has been discussed in the same forum on many occasions PLEASE NOTE THAT THERE IS NO SUCH LAW
T Sivasankaran

From India, Chennai

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