Why an IT Organization never increases your basic pay in Salary?

If you are working in an IT Organization then you might want to look deeper into your payslip or salary slip after an increment or promotion. What you find is just amazing. You will see an increase in all the components in your salary except basic. You might wonder why is that. Well, this can happen due to many reasons but the most important one which I recently found out is simply shocking.


Why an IT Organization never increases your basic pay in Salary?

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This is something which usually no one going to explain you or make you understand. It is simply because at any time finance team has to make sure to reduce cost to company and increase the profit. Even though it will look like to an employee that he/she is getting hike every year but in reality employee does not get what they deserve at the time of separation. Yes, you are guessing it right. I am talking about gratuity here which is one of the amount employee bound to receive after completion of a minimum of 5 years of employment in an organization.

Something similar happened to me as well. All these time, I was under impression that since I am getting increment every year, I will be going to get good amount of gratuity after completing 5 years in the Organization. So I kept working hard and gave it all. After few years of my employment, I decided to check the rule about gratuity to make sure I am getting good amount so that I can plan for my feature. But when I looked into the rule for calculating gratuity, then I was in state of shock.

If you look into the formula of how gratuity is being calculated, you should see something like below:-

Gratuity = No. of years worked*(last drawn monthly basic + DA)*15/26

As you might notice from above formula, your gratuity would be decided basically by two components – number of years worked in an organization and (last drawn monthly basic + DA). But here the catch is out of these two components, organization can only control (last drawn monthly basic + DA) as number of years can’t be stopped or reduced.

So to understand, your gratuity is increasing from both the component but the highest contribution comes from your basic package and dearness allowance. So if an organization has to decide to limit your gratuity amount then the best possible way is to never increase your basic package and just increase the additional component like special allowance, bonus etc, so that you will also be happy and satisfied with yearly increment or promotion and organization will also be happy that at the end of day they are almost paying nothing to you and you leave empty handed.

At this time, it is also important to understand that above concept is largely true for majority of the employees if not all. For some of the management level or executive level employees, they might follow different approach as for them the concept is to give an attractive package and make them happy all the time so that they don’t leave organization and join other competitive organizations.

I hope this gives you enough insight about one of the reasons why basic component in your salary never increases. Surely there would be other reasons as well but I recently found this as one of the main reason. If you know any other reasons, please do write in comment for everyone to know and benefit from your knowledge and experience.

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