Salary Structure Dilemma: Can I Set Basic Salary at 50% of CTC Instead of Gross?

In my current organization, the calculation of basic salary is 40% of the monthly gross. I want to restructure the entire CTC structure of the organization. Can I keep the basic salary as 50% of CTC instead of gross?

You can have any structure, but ensure that the Basic & DA is not less than the minimum wages.

Hello Priyanka.K. There is no issue whether the basic will be at 40% or 50%. There's no stipulation in the rule books at present. However, once the new Code on Wages is implemented, there is a compulsion pegged at a minimum of 50% of the gross salary. That's not too far, I hope. However, your attempt to link it with CTC leads you nowhere. This is because CTC is not yet recognized in our statute, and there is no uniformity either in its concept or in components across various sectors of our economy. I hope you are aware of what is included under CTC and its quantum, and all those are not meant to be disbursed in cash on a monthly basis similar to disbursing the salary. Needless to elaborate further. But it doesn't mean many of these components can't be codified and quantified, broadly. But still, no employer is going to accept your ambitious 50% on CTC for the simple reason that the consequential financial burden is going to be countless, unbearable, or prohibitive. This is because various employee benefits, not payable in cash under various acts if and when applied on a monthly basis, would be based on Basic pay as per various applicable acts in vogue.

That apart, are you empowered to take a decision on these vital policy guidelines?

There is no restriction on the basic salary being higher. However, you need to consider the impact of this on various benefits and statutory dues. For PF, there is a cap of ₹15,000, so having a basic salary higher than that will not impact the PF payable. However, for gratuity, it is payable based on the last basic salary drawn, so ensure that you have factored that into your provisions.

Code on Wages Implementation

The restrictions (minimum 50% of Gross Wages) will apply after the Code on Wages is implemented in India. Until then, there is no restriction. Remember, the limit in the Code on Wages is that it cannot be lower than 50%; you can have it higher. Further, it is 50% of gross wages, including the employer's contribution to PF and bonus, not 50% of CTC.