Loading page
All-in-one HR platform · v2.0
14-day free trial · No credit cardhello@HrMagix.com
All-in-one HR platform · v2.0
14-day free trial · No credit cardhello@HrMagix.com
The core fixed component of a salary, before allowances. It matters far beyond its own size, because the provident fund wage and the gratuity calculation are both computed on it, which makes the split between basic and allowances a cost decision rather than a formatting one.
Basic pay is fixed when the offer is drafted, and most companies set it as a share of CTC that is applied to every grade, so one decision drives cost across the whole structure. HR and finance revisit that share when the PF ceiling policy, gratuity exposure or the labour code wage definition is reviewed.
As an example, on a monthly CTC of ₹60,000, setting basic at 40% gives ₹24,000; at 50% it is ₹30,000. The higher basic raises gratuity accruals and, if PF is paid on actual basic rather than the ₹15,000 ceiling, raises employer PF as well.
The mistake to avoid is keeping basic very low and loading allowances. Under the Code on Wages, in force since 21 November 2025, allowances above 50% of total remuneration are added back to wages for statutory calculations, so a low basic no longer reduces those costs and can create back-dated liabilities when audited.
Basic pay is the core fixed component of a salary, before allowances.
The provident fund wage and the gratuity calculation are both computed on it, so it drives costs well beyond its own size.
Yes. The PF wage is basic plus dearness allowance, subject to the ₹15,000 statutory ceiling where the employer applies it.
Yes. Gratuity uses the last drawn basic, at fifteen days' wages for each completed year on a twenty-six day divisor.
No. Because PF and gratuity depend on basic, the split is a cost decision rather than a formatting one.
No. Gross salary is basic plus allowances and any variable components, before deductions.
Where DA is paid, it forms part of the PF wage together with basic and part of the wages used for gratuity.
It is the fixed core of the salary; variable components sit outside it in gross.
14-day free trial · Full access to all 12 modules · Zero implementation fee · Cancel anytime