Compensation structure for any organisation usually has three components to-the base salary which is fixed and regular for all employees; incentive designed to reward employees for good performance and benefits which usually nonmonetary in nature. A perquisite also known as perks is a special kind of benefit for a limited set of employees.
The conventional notion has been that compensation strategy of an organization is determined by the job/role evaluation, market competitiveness & the budget.Keeping the long term financial impact ( as all long term benefits like gratuity,PF,Pension,leave encashment,etc are linked to basic) in mind the organisations should make an attempt to keep the basic salary hovering around the 30 to 50% of gross .Care needs to be taken that the Basic salary for every employee is higher than the minimum wages applicable to the respective industry( usually minimum wages are revised twice a year,where as annual reward happens on an yearly basis so keeping in mind the historical data of rise in minumum wages the basic salary should be fixed).Regarding other components of the structure one needs to keep in mind the prevalent industry practice & the applicable non taxable limits for certain components like LTA,Medical reimbursement,conveyance,canteen subsidy,food vouchers,HRA( 50% for Metro & 40% for other cities) as set in The Income Tax Act .These non taxable limits are subject to review every year and one needs to be keep on reworking the CTC structure every year keeping in mind giving maximum benefit to employees for a tax efficient salary.thus the compensation structure shoud be dynamic in nature