Basic Salary
Basic salary is the base income of an individual. Basic salary is the amount paid to employees before any reductions or increases due to overtime or bonus, allowances (internet usage for those who work from home or communication allowance). Basic salary is a fixed amount paid to employees by their employers in return for the work performed or performance of professional duties by the former.
According to experts, the basic salary differs according to the type of the industry. For instance, employees in the information technology industry prefer take-home salary (since the staff turnover is high) while employees in the manufacturing companies get more fringe benefits.
How to Calculate Basic Salary?
Given that it is the base income, basic salary is used to calculate other constituents of the salary. Several components of a salary package may be calculated based on the basic salary amount (on the basis of the grade of an employee within a company’s salary structure). It is important to note that the amount of money that an employee earns working overtime does not, in any manner, raise his or her basic pay amount.
What’s the Difference Between Basic and Gross Salary?
Basic salary is a rate of pay agreed upon by an employer and employee and does not include overtime or any extra compensation. Gross salary, however, is the amount paid before tax or other deductions and includes overtime pay and bonuses. For instance, if an employee has a gross salary of Rs. 40,000 and a basic salary is Rs.18,000, he or she will get Rs.18,000 as fixed salary in addition to other allowances such as House rent allowance, conveyance, communication, dearness allowance, city allowance or any other special allowance.
Net Salary
Net salary is the remainder after statutory deductions such as taxes are made from the gross salary. Net salary is the ‘take home’ salary of an employee.
Dearness Allowance
Dearness Allowance is cost of living adjustment allowance which the government pays to the employees of the public sector as well as pensioners of the same. DA component of the salary is applicable to both employees in India and Bangladesh
House Rent Allowance
HRA or House Rent Allowance is a salary component paid by employer to employees for meeting the accommodation expense of renting a place for residential purposes. HRA forms an integral component of a person’s salary. HRA is applicable to both salaried as well as self-employed individuals.
Cost To Company – CTC:
Cost to Company or CTC as it is commonly called, is the cost a company incurs when hiring an employee. CTC involves a number of other elements and is cumulative of House Rent Allowance (HRA), Provident Fund (PF), and Medical Insurance among other allowances which are added to the basic salary.
These allowances may often include free meals or meal coupons, such as Sodexo and the like, office space rent, cab service to-and-fro office, and subsidized loans et al. Basically, all these elements when combined together, form the entire Cost To Company.
