As the name suggests, a fixed salary is a predetermined amount you get for the services rendered to your employer. Understanding this amount from within your CTC helps you plan your finances & effectively negotiate your salary in the future.
Your basic pay and any other eligible benefits, such as house rent, transportation, and dearness allowances, are all included in the fixed salary. Fixed pay is the monthly compensation that the employer pays the employee. Usually, you are legally entitled to this amount irrespective of other influencing factors such as individual or company performance.
The fixed salary is the predominant part of a typical salary structure. It's because larger companies with a longer tenure in the industry tend to have a more balanced salary mix and stable stream of income to sustain the salary liabilities.
The fixed salary may be lower than the variable components such as stock options, bonuses, and incentives. Growing companies prefer keeping their fixed costs low and are willing to dole out payments when they witness a profit boom.
A fixed salary offers a higher sense of security as you know your monthly cash inflow. It helps you optimise your budget & factors in monthly expenses, utility bills, EMI payments, investments, etc. It
Makes up 40-50% of the overall fixed salary and influences other components such as HRA (40-50% of basic), DA (25-38% of basic), or PF (12% of basic).
The employer can choose which allowances to pay its employees. Often, the allowances offered are House rent allowance (HRA), Dearness allowance (DA), Conveyance Allowance, Medical Allowance, Special Allowance, etc.
Adding the basic salary and all the monthly allowance will provide your fixed salary component. It can also be done from the CTC (cost-to-company) details, although it usually depicts the annual figures. So, you will need to add the yearly basic salary + allowances & then divide the sum by 12 to get your monthly fixed salary.
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No, the CTC is the larger umbrella that your pay falls under. CTC (cost to the company) is the company's total expense for your employment. It includes all the amounts paid to you and the deductions made on your behalf and deposited to the regulatory institution, such as taxes paid to the Income Tax department or the contributions made to the Employee Provident Fund Organisation (EPFO).
CTC represents the company's cost and encompasses all components such as basic pay, direct benefits, indirect perks, variables such as bonuses, incentives, and deductions such as taxes and retirals.
Fixed salary refers to those salary heads that are predetermined by the employer and paid out each month. Typically, these are basic pay, HRA, and some other allowances.
The employer sets the variable part of the salary and can influence factors such as individual performance, company profits, the nature of your role, etc. Variable salary includes sales or performance-linked incentives, commissions, stock options, retention bonuses, etc.