Understanding Basic Salary: What Percentage of Your CTC Should It Be?

How is basic salary defined and what proportion of the cost to company (CTC) should be allocated to basic salary? For example, if the monthly salary is $20,000, is there a specified percentage that should be designated as basic salary? Can someone please provide an explanation?

Hi Vijaylakshmi, For metro cities, the basic salary calculation is 50%, and for non-metro cities, it is 40%. For example, if your gross salary is 20,000, the basic calculation would be as follows:
- Metro Cities: 20,000 / 50% = 10,000
- Non-Metro Cities: 20,000 / 40% = 8,000

There are some companies that pay a minimum or fixed basic salary (4,000 or above 4,000) for employees who would earn more to reduce their PF contribution towards the employee's PF account.

Hope this information is helpful to you.

Regards,
Saritha

PF authorities are insisting on a minimum of 50% as basic (if DA is also included, then it should be Basic + DA) salary. If you structure it as annuities like Medical reimbursement / LTA, the basic will decrease.

Thanks and regards,
Kamesh

Understanding Basic Pay Allocation

Maintaining 40% or 60% of CTC in Basic Pay is not applicable for all companies. It varies from company to company. In general, there are no thumb rules to maintain Basic Pay.

In a private company, the company management decides how much % of CTC will be given as Basic Pay. In a government company, the Government of India (GOI) or its appointed body decides how Basic Pay and other benefits will be given to employees.

Conclusion

There are no thumb rules for maintaining a minimum % of CTC as Basic Pay.

Understanding Basic Pay in CTC

Maintaining 40% or 60% of CTC in Basic Pay is not applicable for all companies. It varies from company to company. In general, there are no thumb rules to maintain Basic Pay.

In a private company, the company management decides how much percentage of CTC will be given as Basic Pay. In a government company, the Government of India (GOI) or its appointed body decides how Basic and other benefits will be given to employees.

Conclusion

There are no thumb rules for maintaining a minimum percentage of CTC as Basic Pay.

Regards,
Abhishek

Dear All,

Maintaining 40% or 60% of CTC in Basic Pay is not applicable for all companies. It varies from company to company. In general, there are no thumb rules to maintain Basic Pay.

In a private company, the company management decides how much % of CTC will be given as Basic Pay. In a Government company, GOI or its appointed body decides how Basic and other benefits will be given to employees.

Conclusion: No Thumb Rules for maintaining a minimum % of CTC as Basic Pay.

Regards,
Abhishek

As per my knowledge, Basic and DA should not be less than the minimum wages as defined by the Minimum Wages Act. This is perhaps to ensure more PF contribution from the employer and employee...

Can somebody tell me what is the basic for employees who are working in a small-sized BPO in a city like Bangalore.

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In a small-sized BPO operating in a city like Bangalore, employees can expect to receive a basic salary package that typically includes a fixed monthly salary, employee benefits such as health insurance and paid time off, and possibly performance bonuses based on individual or team achievements. Additionally, employees may also have opportunities for career growth and skill development through training programs provided by the company. It is essential for employees to familiarize themselves with the specific policies and regulations of the BPO they are working for, as these can vary between companies.

Dear all,

Is there any specific ruling for maintaining a specific percentage as basic, DA, HRA, etc.? To the best of my knowledge, the competent authorities have the power to check whether the minimum wages, in total as per the act, are being paid or not.

Regards,
A Elangovan

Understanding Basic Salary and Its Proportion in CTC

For calculating retirals such as Provident Fund, Gratuity, and Pension, the basic salary is important. For employees earning dearness allowance, which is also considered for retirals, the basic salary is relatively low since dearness allowance is a substantial amount. Employers prefer to keep this portion of the remuneration lower because they have to contribute to the retiral funds, and this contributes to employment cost escalation.

For employees—mainly managerial and supervisory staff—who do not receive dearness allowance, the rule of thumb for large, well-established companies is that the basic salary constitutes 30% of the CTC. This is because an increasing portion of annual remuneration is being allocated to variable pay.

Regards,
A. K. Basu

Basic salary includes what?
I mean, what are the various things covered under the basic salary?