Can Basic Salary Vary Among Employees in the Same Company? Seeking HR Insights

Dear Experts, please help me solve my problem regarding HR forms. I want to prepare an appointment letter for an employee in my company. Her starting salary is $10,000.

Salary Breakdown

Basic Pay: $5,000 (50% of Gross)
HRA: $2,500 (50% of Basic Pay)
Conveyance: $1,600
Medical: $1,250
-----------------
Total: $10,350

When I set the Basic salary at 40% of the gross, it becomes Basic $4,000, HRA $2,000, Conveyance $1,600, and Medical allowance $1,250. This totals $8,850, and with other allowances of $1,150, the total becomes $10,000.

Question on Salary Structure

My question is, can the Basic Salary differ from employee to employee within the same organization?

Thank you.

Understanding Basic Salary and Allowances

Basic salary may vary depending on the company policy. However, in my opinion, you must adhere to the Payment of Minimum Wages Act. This circular is issued by the respective State Governments. The Government of Maharashtra revises these wages every six months (January & July). In this circular, the minimum basic salary and the special allowance payable to the employees are mentioned.

HRA would be 5% of the Basic + Special Allowance. Taking this amount of Basic/Special Allowance/HRA, the balance amount can be paid as Conveyance Allowance.

Total allowance cannot exceed 100% of the basic. Vice versa, the basic cannot be lower than 50% of the gross salary.

Balance can be adjusted as per your convenience. There is no hard and fast rule to pay a conveyance of 1600; it is the maximum tax-free cap limit. You can adjust it to 1250 to reach the desired figure.

Dear Vishnu B N,

Greetings!

Salary Structure as follows:

Gross salary - 10,000/-
Basic - 5000/-
HRA - 2500/-
Conveyance - 500/-
Special Allowance - 750/-
Medical Allowance - 1250/-

You must streamline your company's policy, whether to keep basic as 50% of Gross or 40% of Gross. Do not create confusions in salary structures.

Hi Vishnu,

Your interpretation of the calculation is incorrect.

HRA will be 40% of Basic if in non-metro cities and 50% of Basic if in metro cities.

Basic can vary between 35 to 50% of Gross. It's upon the organization.

Other than Basic; HRA; Conveyance; and Medical, you may include the rest of the amount to Special Allowance and Other Incentives to adjust to CTC.

In my opinion, the basic salary should not be less than Rs. 6500/- per month as having a lower basic will result in issues with the PF department. Regarding the remaining amount, you can follow the advice provided above.