What is a basic salary?

Basic salary is the fixed amount of money an employee receives before taxes and other deductions. It's the core compensation offered for the role and responsibilities outlined in the job description. While other benefits like bonuses, overtime pay, and health insurance are not included in the basic salary, their amounts are often calculated as a percentage of it. Examples of benefits based on basic salary include employee social security contributions (ESIC), provident fund contributions (EPF), commissions, and gratuities.

How does basic salary differ from gross salary and net salary?

Basic salary: This refers to the amount negotiated between an employee and an employer as the base wage. It is exclusive of any overtime pay or extra benefits.

Gross salary: This is the total sum of money that an organization is obligated to pay to an employee before deductions are made.

Net salary: This is the amount the employee receives after all deductions have been made.