Can I Set an Employee's Basic Salary as 100% of Their Gross Pay? Seeking Advice

Dear Seniors,

My company is a limited one. Can I put all the gross salary in basic only? For example, if an employee's salary is 16000, can I show his basic salary as 16000 without segregating into HRA, medical, or conveyance allowance? Kindly suggest if the basic can be 100% of the gross salary or not.

Posted 8th June 2016

Please help me out...

Hi,

Yes, you have mentioned a basic salary of 16000 with allowances such as HRA, medical, and conveyance. These allowances are not statutory liabilities. However, if the employee is eligible for a bonus/gratuity, then the amount shall differ.

For example, if the basic salary is 16000 and the bonus is calculated at 8.33% of 7000, the bonus amount would be 583/-. Therefore, the gross salary would be 16583/-.

Thank you.

Dear Rits,

It is mandatory to show D.A., HRA 5%, Minimum. This is as per the law.

Regards

It is advisable to constitute salary as basic & allowances. In Maharashtra & WB, HRA is mandatory. Mandatory or not, HRA should be one, conveyance allowance should be other. If you pay the whole salary as basic, you will pay higher gratuity if such an employee completes 5 years of service. Include a few allowances along with the basic salary.