Confused About Basic Salary Percentage? Seeking Clarity on Official Guidelines

Clarification on Basic Salary Percentage

Often, one question is asked: what is the percentage of the basic salary? Because there is no clarification, some say the basic salary should be 60% of the gross amount, with the remaining 40% able to be allocated to HRA, CCA, and other allowances. Others argue that there is no specific rule stating that the basic salary must be 60%; they suggest figures such as 40%, 45%, and 50%.

Therefore, please clarify this confusion. Is there any central or state government regulation or rule, as per an act, in the private sector that mandates the basic salary to be 60%? If there is any notification regarding this matter, please provide it.

Thank you.

I don't think there is any such government rule. As per my experience, most of the private companies (MNCs) keep the basic salary high as opposed to private companies (Indian). Indian companies mostly keep the basic at about 30-40% of the total CTC (Cost to Company). It depends on the company's individual policies.

Understanding Minimum Wage Components

In minimum wage, there are not too many components. The total wage is basic pay. Hitherto, at least two components, i.e., basic pay and living allowance, were present. Now, it is consolidated into one for all purposes. I assume you are discussing IT personnel and referring to CTC.

Regards.

Understanding the Impact of Basic Salary on CTC

For CTC (Cost to Company) people, a higher percentage of basic salary means higher terminal benefits, increased savings through Provident Fund (PF), and higher House Rent Allowance (HRA) for tax planning purposes.

Regards,
Pon

Dear All, there are no rules regarding the fixation of the basic percentage, but it should be reasonable and fair. When a state government declares the Minimum Wage (MW), it is declared with components, and no one is allowed to further bifurcate the components. For example, when the state government states that the MW shall consist of two parts - basic and DA or VDA - then the employer cannot alter the MW value into three components.

malikrg said it rightly. There are no rules regarding the fixation of the basic percentage, but it should be reasonable and fair.

There is no law on the percentage of the basis to Gross or CTC. However, it should not be less than the minimum wage rate as applicable to the concerned employee.

I also agree that there is no provision for the fixation of basic salary; it depends on the company to decide. However, the basic salary is a major part of minimum wages, so it should not be less than the minimum wage.

In my company, at the time of increment, we never raise the Basic salary. For those who are affected by the Minimum Wage Act, we increase their Basic pay according to the minimum wages Act for that particular year. We are a dealer and come under the Shops & Establishment Act. Is this okay? Please advise.

Jayant Nisal
nisaljayant@yahoo.com
Multitech Hydrosystems
Pune

What should be the basic salary percentage against gross salary as per government rules?

Thank you!