Salaried individuals need to know many things regarding their pay structure, and the percentage of the basic salary in their CTC is one such important aspect to be aware of. Typically, the basic salary in most companies is set as a percentage of the CTC. Although the basic salary can be computed using other formulas, it is essential to know how much of your CTC is composed of the basic pay.
Also known as the base salary, this is the sum of money that you earn each month before any additions or deductions are applied to the pay. The basic salary is the minimum guaranteed sum that you earn from your employer each month. Typically, additions like allowances and deductions like taxes and PF payments are applied on the basic pay, thus leading to the overall gross or net salary each month.
The CTC or Cost to Company is the total value of the salary package offered to an employee. It is the sum of all the expenses that a company incurs towards an employee during the year. This means the CTC includes the fixed and the variable components of the salary. So, the basic pay is also a part of the CTC.
The basic salary is a component of the cost to company (CTC). Irrespective of the nature of your job, the CTC will include the basic pay or the basic salary, since the latter is a fixed component and serves as the basis for computing various other components of your salary.
If you know your CTC as well as the basic salary, you can easily compute the percentage of the basic salary in your CTC using the formula shown below.
Percentage of basic salary in CTC = (Basic salary ÷ Total CTC) x 100
For instance, let’s say your annual CTC is ₹10 lakhs and your basic salary is ₹4 lakhs per annum. In that case, the percentage of basic salary in your CTC would be computed as shown below.
Percentage of basic salary in CTC:
= (Basic salary ÷ Total CTC) x 100
= (₹4 lakhs ÷ ₹10 lakhs) x 100
If you do not know your basic pay, but you’re aware of the CTC and the percentage of the basic pay in your CTC, you can work back to compute your basic salary easily. Here is a closer look at the formula you can use for this purpose.
Basic salary = Total CTC x Percentage of basic salary in CTC
Let’s again take up an example to see how this works. Say your annual CTC is ₹10 lakhs and your basic salary is calculated at 50% of this CTC. In that case, the basic salary will be computed as shown below.
= Total CTC x Percentage of basic salary in CTC
= ₹10 lakhs x 50%
= ₹5 lakhs
Remember that the higher the basic pay, the more beneficial it is overall, since several components of the salary are computed as a percentage of the basic pay you receive. So, by negotiating a higher basic salary, you can also get an increase in other related components of your salary.
Typically, the percentage of the basic salary in the CTC ranges from 40% to 60%. However, in some cases and for certain job positions or roles, the basic salary may be calculated at a lower percentage of the CTC. In these cases, the company may compensate the employee through other channels like commissions and result-based earnings.
You can calculate the basic salary as a percentage of the CTC in India, if you know the rate at which the company is setting aside the total cost to the basic pay. For instance, if your employer has informed you that your basic pay will be 40% of the CTC, and if your CTC is ₹50 lakhs per annum, your basic pay will be 40% of ₹50 lakhs, i.e. ₹20 lakhs per annum. On a monthly basis, this will translate to ₹1.67 lakhs per month, roughly.