Understanding Basic Pay Increments: Why Are They Often Minimal Compared to Variable Pay?

Hi Friends,

Can anyone tell me how the basic pay of an employee is assessed? Because in my current company, the appraisals have taken place with very marginal changes in basic pay, but drastic changes in the variable pay part. Our Salary structure comprises of Basic, DA, HRA, Conveyance, Allowances like Medical, LTA, & Kit allowance, entitled for PF also. Is there any strong reason that basic pay should be appraised in case of increments, especially in IT companies (or any other concern)? Any articles related to this also serve to take a strong position. I remember that somewhere on this informative site, I had read a post that basic pay helps in assessing the skill sets, but it's not clear. Hope Amit, Peer Mohd shall also help me out asap.

It is a recent trend (and a welcome trend at that) in many organizations these days to increase the basic pay to some extent, primarily to offset inflation, and introduce Performance Pay that substantially increases the compensation of good performers.

Though the employees in many organizations, who were earlier used to getting substantial salary hikes, are unhappy about such a method of salary revision, it is seen that this is a fair method of rewarding employees based on their performance. Needless to say, the introduction of Performance Pay should be implemented only after ensuring that you have a fair and impartial Performance Appraisal process in place.

Hi Raj,

I agree with the new trend of Performance Pay. Sorry that I have not included in my previous post... that performance pay component is also included in the salary structure. Fine with it.

My query is, say if I'm getting Basic as 2000 pm since Jan & now my appraisal has happened of 90% w.r.t CTC but my Basic remains the same, though I'm getting a good net salary. Though it could be the psychology of many that basic should also be good in fig as it contributes part of it to EPF.

Now, Say I'm happy with the appraisal part, while unhappy with no changes in Basic... How can I take my stand now? This is because I read in one of the posts on this learning site that basic pay also helps in assessing the skill sets.

I want some article or the practice that other growing IT companies are following... Friends, please let me know whether the candidate is assessed on their basic pay with respect to skill sets or on CTC....