What is Fixed Pay?

Fixed pay is the portion of the salary that does not vary every month depending on company policies or individual productivity. This salary type is stated in the Salary Slip with basic salary and allowances like HRA, DA, TA, Conveyance Allowance, etc. It is also known as Salary Total in some companies’ policy documents.

What is variable pay?

Variable pay is the amount paid on top of an employee’s fixed pay. It can be various types of bonuses or reimbursements.

What are the advantages of Fixed Pay?

Many employees prefer fixed pay because it is more advantageous than other forms of payment. It provides:

• Job security: Employees receive fixed monthly pay despite missing a few days or working flexibly. This ensures job security and enables employees to feel safe.
• Employee happiness: The happiest employees are those free to work flexible hours and still receive the same pay. Fixed pay compensates employees fairly for the work they do.
• Work flexibility: Employees can work a few hours less or extra in a week and still get paid the same. Employers pay the fixed pay amount to employees unless they take unscheduled leaves.
• Better Budgeting: Fixed Pay for employees ensures that the company sticks to the budget and manages its finances better.

FAQs

What is an example of fixed pay?

For example, employee Aditi receives a salary of 50,000 INR every month and a fixed house rent allowance of 10,000 INR. At the end of the year, they receive a bonus of 100,000 INR. While the salary and house rent allowance are fixed pay, the bonus is variable pay.

What is the difference between fixed pay and variable pay?

Fixed pay is the predetermined compensation the employee will receive every month, including the basic salary, allowances, etc. However, additional payments that occur seasonally, like festival bonuses or performance bonuses, are variable pay.

Is PF part of fixed pay?

No, PF is not a part of the fixed pay.