Two identical CTCs, two different take-homes
The breakdown of remuneration into components, each with its own tax and statutory treatment — and the reason two identical CTCs pay differently.
The Components
Basic, DA, house rent allowance, conveyance, special allowance, reimbursements and benefits — each behaving differently.
Not Cosmetic
PF and gratuity run on basic plus DA. HRA carries a conditional exemption. The total determines ESI eligibility.
Constrained Now
The Code on Wages requires wages to be at least half of total remuneration, limiting the small-basic approach.
A salary structure is the breakdown of remuneration into components: basic, dearness allowance, house rent allowance, conveyance, special allowance, and any reimbursements or benefits.
The structure is not cosmetic. Each component behaves differently — provident fund and gratuity are computed on basic plus DA, house rent allowance carries a conditional exemption, some reimbursements are tax-free against proof, and the gross total determines ESI eligibility.
Two employees on identical cost to company can take home noticeably different amounts purely because their structures differ.
The historical practice of keeping basic small and special allowance large — minimising statutory liability — is now directly constrained by the Code on Wages requirement that wages be at least half of total remuneration.
Beyond compliance, structure is a communication problem. A candidate who is quoted a CTC figure and reads it as take-home is not being unreasonable; the two are routinely presented as if interchangeable. Showing the split at offer stage — what is basic, what is employer PF, what is gratuity provision, what actually reaches the bank — prevents the most common first-payslip dispute.
Whichever structure you adopt, the discipline that matters is applying it consistently by grade and recording why. Structures negotiated candidate by candidate become impossible to defend, both to an inspector and to the employees who eventually compare notes with each other — which they do.
Salary Structure FAQs
What percentage should basic be?
Enough that wages are at least half of total remuneration, per the Code on Wages. Beyond that it is a trade-off between immediate take-home and retirement corpus.
Why is take-home lower than CTC?
Because CTC includes employer costs that never reach the employee — employer PF and the gratuity provision — and because the employee's own PF, professional tax and TDS come out of gross.
Can different employees have different structures?
Yes, and grades commonly differ. What is hard to defend is ad-hoc variation between people doing the same job at the same level.
How much of pay should sit in basic?
Enough that the wage definition is satisfied — the newer framework requires a substantial share within the wage base, which directly targets structures built to minimise contributions.
Can two employees at the same grade have different structures?
They can, but wide variation invites the question of whether the structure is designed around statutory cost rather than the role. Consistency within a grade is the safer default.
What breaks when we restructure?
Gratuity, encashment, notice pay, bonus and overtime all move with the wage base. Model every liability before announcing a restructure, not after.
Stop working this out by hand
Klok applies these rules on every payroll run, from your own attendance and salary data, with the working shown.