Basic Salary

How do you calculate monthly basic salary?

Most companies calculate salary or compensation annually (that is for a 12-month period time), that is they have 12 yearly pay days. To calculate the monthly basic salary, simply divide the total compensation by 12.

Who decides the basic salary for an employee?

Employers decide the basic salary for employees based on a number of factors such as years of experience, educational qualifications required for the job role and difficulty or seniority of the job role. Basic salary is subject to minimum pay rate that every organization follows.

What is the difference between basic salary and base salary?

Basic salary is the salary paid to an employee before any additions or reductions to the overall compensation, such as investments, dues, overtime pay or a bonus.

Base salary is a fixed amount of money paid to an employee by an employer in exchange for the man hours put to work. It can include certain incentive based on extra work time or any other potential compensation from an employer.

Is basic salary the same as gross salary?

The only difference between basic salary and gross salary is that gross salary also includes overtime pay, bonus and other incentives along with the fixed pay decided by the employer at the time of joining while basic salary only consists of the fixed pay.

Why is it good to have a low basic salary?

A low basic salary implies less fixed pay and more variable pay. This helps in reducing the tax component of salary and facilitates to minimize income tax because allowances and variable pay is rarely subject to income tax.

What is the basic salary rule?

The basic salary rule in India as stated by the new Wage Code Rules is that the basic salary of the employees should be 50% of the total salary or the Cost to Company (CTC), and not less than this. This means the employer will have to pay salary comprising of 50% or more basic salary and less allowances and other variable component.