What is Fixed pay?

Posted on 09th Jul 2018 | 3685 views

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Annual fixed salary:

Annual fixed salary is the salary package offered per annum to the employee at the time of recruitment. Annual salary is the combination of fixed salary and variable pay. A certain percent of annual salary is accounted into variable pay. Annual salary is defined as the gross amount earned by the employee throughout the year and the incentives received during his/her service for that year.

What is fixed salary

What is fixed salary:

What is fixed salary, defined as the equal proportions of the amount earned by the employee through his/ her work on a monthly basis during the current year. Fixed salary comprises of basic pay along with other allowances such as DA (Dearness allowance), TA (Travel allowances), HRA (House rent allowances), and Conveyance allowances etc. Fixed salary comes with tax deductions, EPF scheme etc. Fixed salary is described as a guaranteed monthly wage paid to the employee for his/ her minimum services to the organization.

Fixed salary and variable salary combined together gives the total annual salary but the fixed pay is a monthly basis pay whereas variable pay is paid quarterly, half yearly or yearly. Variable salary is related to the work performance of the employee and its calculation is based on company terms and condition. Variable salary is a type bonus or incentive rewarded to the employee for meeting the goals.

Cost to Company or CTC fixed and variable pay is calculated as fixed pay (X% of the package offered) plus variable pay ( 100-X% ). CTC is a composition of the total expenditure of an employee including special allowances, basic pay, and incentives. The base salary which is definite regardless of the employee performance including other allowances minus tax on a monthly basis is defined as fixed pay and variable pay is a bonus or reward given to the employee for his/her high standard of performance in the company for the current year and is taxable.

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