Salary
This query is : Resolved
R KALYANA SUNDARAM
(Querist)
31 May 2014
Fixation of Salary as per TN Notification carried out. But somebody is telling to fix the basic 40% of gross. Is it correct ? Is there any proof released by Govt ?
Amol S Joglekar
(Expert)
31 May 2014
No such instance. You can have your own amount as basic.
R KALYANA SUNDARAM
(Querist)
03 June 2014
Dear Sir,
If I am getting 60000 salary how will you fix it. if we fix as per the govt norms, the amount will not exceed 7000 i.e. basic + da.
please provide your answer considering the minimum wages act.
If I am getting 60000 salary how will you fix it. if we fix as per the govt norms, the amount will not exceed 7000 i.e. basic + da.
please provide your answer considering the minimum wages act.
22 July 2025
Fixation of Basic Salary as 40% of Gross Salary — Is it Mandatory?
No universal govt notification mandates basic salary to be 40% of gross salary.
The “40% basic” is often a common industry practice or company policy but not a statutory requirement.
Employers can fix the basic salary at any reasonable percentage of gross salary, as long as other statutory compliances (like minimum wages, PF, etc.) are met.
What About Minimum Wages Act?
The Minimum Wages Act requires paying at least the notified minimum wage for a particular job/category in the state.
The minimum wages are generally fixed as a gross amount, including basic, DA, and other allowances.
The Act does not specify the breakup of gross into basic, DA, etc. That breakup is up to employer policy.
Example in your case (₹60,000 gross):
If the employer or company policy says “Basic = 40% of gross,” then basic = ₹24,000.
If minimum wages notified by TN govt are say ₹7,000 gross, then ₹60,000 is much higher than minimum wages, so compliant.
You cannot fix basic + DA < minimum wage for your category. But basic alone can be any amount as long as total salary complies.
Proof or Official Notification?
There is no govt notification fixing basic salary at 40% of gross salary.
However, for PF purposes, the Employees’ Provident Fund Organisation (EPFO) often considers basic + DA (together) for contribution calculations.
The employer usually ensures basic + DA is at least 50% of gross salary to ensure good PF contributions, but this again is policy, not law.
No universal govt notification mandates basic salary to be 40% of gross salary.
The “40% basic” is often a common industry practice or company policy but not a statutory requirement.
Employers can fix the basic salary at any reasonable percentage of gross salary, as long as other statutory compliances (like minimum wages, PF, etc.) are met.
What About Minimum Wages Act?
The Minimum Wages Act requires paying at least the notified minimum wage for a particular job/category in the state.
The minimum wages are generally fixed as a gross amount, including basic, DA, and other allowances.
The Act does not specify the breakup of gross into basic, DA, etc. That breakup is up to employer policy.
Example in your case (₹60,000 gross):
If the employer or company policy says “Basic = 40% of gross,” then basic = ₹24,000.
If minimum wages notified by TN govt are say ₹7,000 gross, then ₹60,000 is much higher than minimum wages, so compliant.
You cannot fix basic + DA < minimum wage for your category. But basic alone can be any amount as long as total salary complies.
Proof or Official Notification?
There is no govt notification fixing basic salary at 40% of gross salary.
However, for PF purposes, the Employees’ Provident Fund Organisation (EPFO) often considers basic + DA (together) for contribution calculations.
The employer usually ensures basic + DA is at least 50% of gross salary to ensure good PF contributions, but this again is policy, not law.
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