Senior Human Resources
Ranganathan V
Human Resources
Dhanesh Kumar
Recruitment & Payroll
Hr Manager
Human Resource
Hr- Executive
+3 Others

Respected Seniours,
I seek your help regarding the following quary.
What will be the possible legal barrier if I reduce the percentage of basic than the existing before increament. Please explain.
Is there any fixed percentage for each column of salary component and what if make any changes onto it.
Please Explaine briefly.
Thanking you
Debajit Roy
Officer HRD
Roy, You cant reduce the Basic component because based on it only we calculate the statutory components. You can change the variable components as per ur terms
Dear Debajit
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.
Dabas, Here it is not the issue of % of basic but about the reduction of basic component which is being followed.
Dear Mr. Roy,
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.

Warmest Regards,

Please check once you send a mail to any one. Being occupied in very important position you should be careful in sending some messages or request. If you check in your post there lots of corrections to be made. Never take things easy as it reflects your attitude. You even misspelled seniors also...Please use spell check once you draft a message.
Now coming to the point Basic Salary...No, you can not reduce it once it is compensated every month.
Deobjit, Basic salary can not be decreased as mostly the increments are as the % of basic salary, however one can change the other interdependant components of salary. Regards, Arslan Ahmed
Dear Debajit,
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.
I am not sure if I will be able to agree with the point that Basic cannot be reduced. There is no legal binding on this. Yes, I do agree with the fact that it will effect all terminal benefit which is linked with Basic salary.

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.

Dear Friend Debjit,
Basic is a very sensitive subject. The prescribed minimum wages to be taken care of. When we confronted the same problem, the treasure of cite hr blessed us with the attached judgement.
Hope the attachment gives you clarity. :)

Attached Files
Membership is required for download. Create An Account First
File Type: pdf Basic 4 pf.pdf (442.0 KB, 857 views)

Dear Debojit,
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.
Nishant Srivastava
Mr.Roy we can not reduce the basic because its the part of Minimum wages act 1948-that is statury compliance under act
Dear Dabajit
Now u can't reduce the % of basic salary. You have to fix the % of basic salary in your HR manual. You have to inform your emplyoee about changes in the salary components.
Thanking You,
Dear Mr. Debajit,
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.
hi dear,
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.
You can reduce the Basic Salary of the employee in order to restructure the salary for whatever reason you have. all have to make sure is that you are not reducing the salary below minimum wages. There is no rule in law where you can not reduce the salary.
Ritesh Kumar Gupta
Add Reply Start A New Discussion

Cite.Co - is a repository of information created by your industry peers and experienced seniors. Register Here and help by adding your inputs to this topic/query page.
Prime Sponsor: TALENTEDGE - Certification Courses for career growth from top institutes like IIM / XLRI direct to device (online digital learning)

About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service

All rights reserved @ 2019 Cite.Co™