New to HR: Why Do Companies Choose Different Basic Salary Percentages?

Dear All,

I am new to HR. Could you please explain to me the reasons behind companies having different percentages of basic salary in the gross salary? Why should I choose either 30% or 40% as the basic of gross salary?

Thank you.

The percentage of basic salary also depends on the wage structure applicable and the company's policy or the legal long-term settlement signed for wages with the union. The basic salary is linked to other payments in the wage structure, so most employers would keep the basic on the lower side when finalizing an employee's salary. For example, we have to pay 12% of (basic + DA) in PF as the employer's share, so the employer's cost of employment will be on the higher side if the basic is high. Therefore, to maintain these employment-related expenses on the lower side, the employer may choose to keep the basic at 40% or 30% of the gross salary, depending on benefits payable to employees such as PF, Gratuity, bonus, etc.

I hope this information answers your query. Other members can also provide further guidance. I recommend discussing this with a senior HR person in your vicinity to gain a better understanding.

Regards

The PF Department is insisting that employers calculate Basic (plus DA) as not less than 50% of the gross salary. Otherwise, they believe that we are trying to evade the PF liability.