What is Basic Salary ?
‘Basic Salary’ or ‘Base Pay’ is the minimum salary paid to an employee before adding any kind of bonuses or any deductions are performed. It excludes all kinds of bonuses including overtime, insurances, travel allowances, etc. as well as any other kind of incentives like commissions, sales, etc.
The basic salary is not variable like the other components of the salary. It is affected only by the annual appraisal which would also affect the other components like PF deductions, professional tax, ESIC, gratuity, etc.
Several factors affect the basic salary though; the designation or seniority of the employee, his/her experience, his/her education level, location of the company as well as the availability of skilled labour for the position, etc. are all important aspects when a basic salary is set for an employee.