Salary Confusion: Is Your Basic Pay Calculated from Gross or CTC?

Hi Team,

My doubt is, "Is basic salary calculated on gross or CTC?" Please help me.

Basic Salary is calculated on Gross salary.

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 calculate the basic salary as a specific percentage of Gross Salary, while some prefer to first decide the basic salary and then they decide the allowances, hence calculating the gross salary.

Dear Viyannar,

The basic salary should ideally be 50% or near of the total CTC. A lower basic with a high CTC would not maintain normalization in the salary structure of the company.

This is my salary details, please help to fill Form 16.

Pay = 228400
DA = 134806
HRA = 22846
IR = 52853
F.P = 360, GPF = 75634, GIS = 720, APGLI = 1650, CM Relief Fund = 1255, PT = 2400, LIC Insurance = 20317.

Please help to file tax returns. Salary details are attached.

Hi,

What percentage should be allocated to basic salary, HRA, and other allowances?

Please provide me with details of the salary structure as I have no knowledge about HR procedures.

Shyam

Dear Friend,

Basic salary will be calculated based on Gross Salary (almost per month). CTC doesn't indicate the salary exclusively. It includes other costs as well (e.g., PF Er. Contbtn./ESI Er. Contbt./Profit Bonus/Gratuity/incentive/Uniform Allowance/Medical Reimbursement/Mediclaim & Accident policy/LTA/Subsidies/Interest on Loans & Advances, etc.).

With friendship,

Sathish Kumar P.

Hi guys,

I think you are all expressing your own calculations. If you are not, why are you explaining in different statistics? Whether you are all correct, why?

With Best Regards,
John Abraham,
US

The assumption itself is not correct.

Gross salary or CTC is a function of Basic pay (mathematically speaking).

Any change in Basic pay is reflected in 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 cases, basic pay is just an arbitrary figure.

In good and big established companies, Gross Pay and CTC automatically get calculated from the Basic pay (and the Grade/Job Band) of any employee.

Instead of just fixing Basic Pay randomly, HRs 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.

Warm regards.

Hi,

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 Allowance + Local Conveyance + Special Allowance).

Regards,
Pushpendra

Basic salary varies from 40% to 50% of Gross Salary (50% in Metro cities).

Dear Shyam,

Greetings for the day.

First of all, let's clear all confusion regarding the basic salary being a part of CTC. From our point of view, the bifurcation of salary will be as follows:
- Basic Salary: 60% of the gross salary
- HRA: 40%-50% exempted from taxes depending on the city classification
- CCA: Rs. 825/- exempted from tax
- Mobile reimbursement
- Medical Allowance: Rs. 1250/- per month exempted from IT

In the CTC, you can include:
- EPF (both employee-employer share including administrative charges)
- ESIC (both contributions)
- Labour Welfare Fund (both shares)
- The components of the above-mentioned bifurcations
- Additionally, food coupons, holiday packages, and furnished items provided by the company. However, the basic wages will never be less than the prescribed minimum wages of the state.

Hope this clears all confusions.

Thanks & regards,

Sumit Kumar Saxena
9899669071, 0120-4131277

The question itself is not so clear when you ask, "Is Basic Salary calculated on Gross or CTC?" However, I admire the succinct manner in which Mr. Raj Kumar has answered the query. Basic Salary is independent of the Gross or the CTC, though it is a part of the CTC. Any change in the Basic pay will impact the Gross Salary and the CTC. But any change in the CTC or the Gross Pay need not necessarily impact the Basic Pay. As has been very rightly explained by Mr. Raj Kumar, any change in Basic Pay will impact the Gross Salary or the CTC. "Ask the right questions and you get the right answers." - Vasant Nair

I think the basic salary is calculated based on the designation or rank and the company norms for that rank to be disbursed.

Dear All,

Please clarify the following: In a manufacturing plant, when a fire accident occurs in the Electrical Department resulting in an employee getting injured due to a short circuit, do we need to submit Form 18 to the Inspector of Factories? My doubt is whether it is required to submit a report to the Chief Electrical Inspector in the concerned area since the fire occurred in the Electrical department.

Awaiting your immediate reply, please.

Regards,
Murali
Email: murali_uma2003@yahoo.com

Dear All,

When the company is giving compensatory leaves (in lieu of cash payments) to the employees who worked late hours as well as extra shifts, then while calculating the ELs for the end of the year, how do we have to work out these compensatory leaves? Should it be considered as Present Day or Leave?

I request you to please clarify the above issue.

Regards,
Murali
murali_uma2003@yahoo.com

Dear Mr. Raj,

If you could elaborate on this with an example, it would be highly appreciated. If the basic amount is Rs 8000/-, how can we design the salary structure of the particular employee?

I thought Basic was a dependent function, as it has been discussed throughout this forum that basic should be around 40-50% of Gross. But as you mention, CTC and gross are dependent functions of Basic. So what is the most essential thing we should have at hand while designing a salary structure, Basic or CTC?

Regards,
Surbhi