A colleague's father asked him a straightforward question: "How much EPF have you saved?" Three years at TCS, ₹8L CTC, and he'd accumulated ₹2.4L. His father, retiring from a PSU bank, had ₹18L from roughly the same period. The gap wasn't about financial discipline—it was structural.
The issue sits in a line item most people ignore: basic salary percentage.
How the Math Actually Works
EPF contributions are calculated on basic salary, not CTC. IT services companies—TCS, Infosys, Wipro—typically structure basic at 25-35% of total compensation. This isn't an oversight; it's deliberate optimization.
The immediate trade-off: slightly higher monthly take-home. The long-term cost: significantly lower retirement corpus.
| Component | 25% Basic | 50% Basic |
|---|---|---|
| CTC | ₹8,00,000 | ₹8,00,000 |
| Basic Salary | ₹2,00,000 | ₹4,00,000 |
| Employee EPF (12%) | ₹24,000 | ₹48,000 |
| Employer EPF (12%) | ₹24,000 | ₹48,000 |
| Total Annual EPF | ₹48,000 | ₹96,000 |
The 30-Year Projection
At 8.25% EPF interest over a standard career:
- 25% basic → ₹35L retirement corpus
- 50% basic → ₹80L retirement corpus
- Net difference: ₹45L
You're trading ₹3,000/month extra take-home (₹10.8L over 30 years) for a ₹45L reduction in retirement savings. That's a 4x loss on what you're gaining now.
Why This Structure Exists
Three clear business reasons:
- Cost optimization: Lower EPF liability across thousands of employees compounds to significant savings
- Competitive positioning: Higher take-home attracts candidates who focus on monthly credit
- Information gap: Most people don't run the long-term calculation until years later
It's not predatory—it's strategic. But the asymmetry only works if employees don't understand the mechanics.
Check Your Structure
Pull your salary slip and calculate:
- Monthly basic × 12 = Annual basic
- Annual basic ÷ CTC = Basic ratio
- Multiply by 100 for percentage
25-35% range means you're in the same position. The question is what you do with that information.
Calculate Your Actual Numbers
Run your specific salary structure through the calculator to see the exact 30-year impact. Understanding your baseline is the first step to compensating for it.
Run Your Calculation →Practical Response Strategy
You can't change employer policy, but you can adjust your financial strategy:
- Bridge the gap: PPF contributions (₹1.5L annual limit) can partially offset the EPF shortfall
- Additional retirement planning: NPS and dedicated retirement mutual funds for long-term compounding
- Career decision factor: Include basic salary % when evaluating offers—a ₹10L offer with 50% basic might outperform a ₹12L offer with 25% basic over time
- Interview questions: Ask about salary structure breakdown, not just CTC
Industry Benchmarks
| Company Type | Typical Basic % | EPF Impact |
|---|---|---|
| IT Services (TCS, Infosys, Wipro) | 25-35% | Lower |
| Product Startups | 40-50% | Moderate |
| FAANG/Global Tech | 50-60% | Higher |
| PSU/Government | 70-80% | Highest |
Core Takeaways
Compensation transparency: CTC isn't the complete picture. Basic salary structure fundamentally changes long-term value.
Compound effects matter: Small annual differences become massive gaps over 30 years. Run the math on your specific situation.
Strategic compensation: If your basic is low, you need disciplined supplementary retirement planning. This isn't optional—it's necessary to match what you'd accumulate in a higher-basic structure.
Informed career decisions: Normalize offers for salary structure when comparing opportunities. The company with the higher CTC isn't always offering better total compensation.
This isn't about demonizing IT services companies—it's about understanding how compensation structures work and making informed decisions accordingly. Check your basic salary percentage today. It's likely the most important financial data point you're currently ignoring.