Can basic salary be decresed ? is it legal ?

PF will be charged on the pre-reduction salary

Dear Sir,

I am extremely thankful to you for sharing your knowledge and enriching me. I genuinely appreciate your kind efforts to clarify my doubts. However I will seek a little further guidance from your end.

First let me clarify the exact condition in my organization. In the Standing Orders of my company it is mentioned that the salary structure is subject to revision every 5 years. The same point is included in the appointment letters of all the employees, both regular and on FTC. As per the existing salary structure the range of basic was fixed for each of the grade with other components of the gross salary being adjusted accordingly. Now the management wishes to revise the structure, due revision in the coming FY, and fix the range of the gross for each grade instead of the basic. The basic and other components to be decided as certain percentages of the gross. In doing so the existing gross will not decrease. Though the majority of people will not suffer but there will be few instances where the basic salary, if calculated as a % of the gross, will become less than the existing basic as per the present structure. This is happening in both the regular & FTC cases.
E.g. Presently Mr. X gets gross salary of Rs.5000/- where the basic is Rs.3000/- and other allowances are Rs.2000/-. Now in the revised structure the gross range for his grade has been fixed as 5,000/- to 10,000/- and basic will be calculated at 30% of the gross. If Mr. X gets an increment of Rs.1000/- then his gross becomes Rs.6000/- and basic will become 1800/- which is less than Rs. 3000/-.

Now, if the basic cannot be decreased then how can the balance Rs.1200/- be adjusted ? You are kindly requested to suggest any remedial action for such cases only. Please be informed that the company is not going to reduce the salaries in general but want to implement the revised structure in the annual appraisal.

With regards,
Soma.

Learned experts/members have given valuable advice. Kindly follow it.

Basic wages are guaranteed cash, and for that matter fixed components also, which should not be reduced.

PF, ESIC officials may not agree.

{ Central Government Act

Section 12 in The Employees' Provident Funds And Miscellaneous Provisions Act, 1952

12. 8[ Employer not to reduce wages, etc.- No employer in relation to 9[ an establishment] to which any 10[ Scheme or the Insurance Scheme] applies shall, by reason only of his liability for the payment of any contribution to 10[ the Fund or the Insurance Fund] or any charges under this Act or the 10[ Scheme or the Insurance

Scheme], reduce, whether directly or indirectly, the wages of any employee to whom the 1[ Scheme or the Insurance Scheme] applies or the total quantum of benefits in the nature of old age pension, gratuity 1[ , Provident Fund or Life Insurance] to which the employee is entitled under the terms of his employment,

express or implied.] }

You may also look into Payment of Minimum Wages Act protects which may protect the current salary of the employee.

Basic, DA is the basis of calculations for payment of OT, Gratuity, leave encashment, bonus, incremental increase in annual salary, pension from EPS…….

You have posted that your company is under IESO Act and has certified standing orders. Your company might have involved employees/union representative during deliberations on standing orders and might be having mechanisms like Works Committee…..

Apparently you have signed a settlement. Your company may need to give notice as per Sec 9A of ID Act.

The changes being looked at by your company would adversely affect the workman. Due care should be taken.

Does your compnay has a union/IC/.Guilg/works committee/Greivance redressal committee.......

Or you have already managed/devised internal plan to obtain acceptance on pretext of renegotiated salary?

If numbers of employees getting affected is only a few the situations can be resolved by adding agreed % to their basic than reducing their basic and bending rules.

Valuable advice of learned experts/members is sought.

Respected Sir (Kumar Doab),

Thank you very much for your kind response.

We don't have any Union or any kind of committee. It was just few old employees who were considered as employees representative. The revised structure is yet to be finalised and before finalisation we (HR) had been instructed to check the drawbacks and suggest for remedy.

Under the above circumstances, I would request to your kindself to advise and/or suggest a suitable method or remedy that can be adopted for such cases.

With regards,

Soma.