The employer can not reduce the benefits of an employee.
as you would be aware that all the benefits of and employee are in proportion to Basic salary, so the reduction in basic salary would effect his / her pension, gratuity, PF etc.
As far as basic salary, you cannot reduce the basic salary. It will be affecting statutory compliances, gratuity, bonus, EL.It is advised to you that you can increase your basic salary but you cannot decrease it.
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Now coming to the point Basic Salary...No, you can not reduce it once it is compensated every month.
If you reduce the basic salary of the employee, apart from the statutory compliances, it will also create negativity among the employees. Being as an HR professional, you should always think about the employees' welfare. If its not possible to increase the monthly salary of the employees then please keep the basic salary unchanged, and you can add some kind of annual variable, retention incentive or performance based incentive kind of heads for increasing their salary. which will increase the annual salary and will not affect the in hand salary of the employees.
Basic's of compensation policy is to ensure that employee take's home atleast the same net salary after taxes. If you are ensuring that, then adjusting the components within the salary should not be a problem.
While employee emotions are attached with Basic, however, with changing trend's many of the younger generation want more take home salary rather than a increase in their PF or Gratuity.
There is no restriction for reduction in Basic as a percentage of the total salary.
But the Employees Provident Fund Act, restrict reduction in Basic Salary in amount terms (in rupee terms).
thus us can go ahead in reduction of Basic in percent terms but not in amount terms.
Hope this clarifies.
Keeping aside all legal jargons regarding this matter, reduction in basis salary may be possible if there is no Standing Order / Service Rules / Bipartite or Tripartite Settlements in operation in your organisation ; even these or any of these exist there is no provision against reduction in basis salary of employees .
All we have to do is to ensure that after reducing basis salary there is substantial increase in one’s take home per month. This may be done through maneuvering
other components of salary package e.g. LTA / Medical / Mediclaim / Insurance / Attire / Communication Allowances / Retention Bonus / Soft Furn . / etc.
However, it is always advisable to take into confidence all concerned employees by HR. Personnel through suitable means before venturing into reduction in basis salary of employees.
PS. Government Organizations will not come under the above purview.
It will be affecting statutory compliances, gratuity, bonus, EL. Over and above this amounts a punishment and against conduct & discipline rules that have been finalised in line with Employees Model standing orders which are statutory. ensure whether it is not applicable.
Ritesh Kumar Gupta