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UHi, I had a query regarding the structure of CTC for an employee. My friend has been working in a firm for the past 8+ years. He has put in his papers and is on a 2 months notice period now. This month they have restructured his salary out of the blue, with the basic being reduced to 28% of the CTC, and the amount being adjusted by increase in HRA, bonus and a significant chunk in “other allowances”
On querying he was told that it’s a management decision.
What could be the agenda behind this and what does he need to watch out for?
Also is there a legal benchmark as per the wage code on what minimun percentage of the CTC should be the basic pay?Thanks in Advance
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UOne of the thing that is directly impacted by reducing the Basic while leaving the job after spending 5+ years is **”Gratuity”.**
The Company is trying to play smart and save the eligible Gratuity amount to your friend by reducing the basic salary.
**Gratuity Formula -** Listed below are the components that go into the calculation of the gratuity amount. The amount is also dependent upon the number of years served in the company and the last drawn salary.
**Gratuity = N*B*15/26**
where,
**N** = Number of Years Serviced in the Organization
**B** = Basic Salary including DA
What is **15/26?** – 15 defines half-month compensation of 15 days and 26 represents the number of working days in a month (excluding Sundays)
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