What Does The Law Say In India Re: Reduction Of Wages - CiteHR
Ad_puneet
Advocate - Labour & Industrial Law
Gresphr
Hr Generalist, Strategic Planning,
+2 Others

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Thank you in advance to the seniors who may kindly reply to this request for knowledge and clarification.
Ours is an international company with two service centers in India. It is a business services company with corporate-like offices and positions. Throughout the company we must make changes to the cost structure to address the business downturn we are experiencing. We would prefer not to lay anyone off. Instead we would like to reduce the wages of all employees globally by 15% until conditions change.
Is this permitted in India? Under which law is there language that applies to this and is relevant to this topic? Is there a specific notice period that applies to changing the terms of employment?
Thank you for your kind assistance.
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Reduction of salary or wages of employee is unfair labour practices and colorable excercise of power by the employer.
Employee salary cannot be reduced without any reason of penalty or fine or demotion to lower post by adopting measure like enquiry into the alleaged charges on employee which results in reduction of salary or wages.
If this reduction is due to economic/business hardship beyond employers control then employee and employer may have an agreement in writing with mutual consent and that agreement should be benefitial to both and protect the interst of both the parties would be accpetable.
Partho
Salaries of employee's are protected and can not be reduced arbitrarily. Management can not reduce salaries of employee without any sound reason and giving employee opportunity for knowing the facts. if company is not doing well he can ask employee to re-negotiate salary. if employee agree to continue with reduced salary that should be brought on records with agreement in writing that both the parties are accepting voluntarily.
Dear

The Industrial Dipsutes Act, 1947 deals with the situation

See. Sec 9-A "Notice of Change" read with Fourth Schedule attached to the Act - 1 "Wages, including the period and mode of payment".

Sec 9-A reads as under:-

NOTICE OF CHANGE
9A. Notice of change.- No employer, who purposes to effect any change in the conditions of service applicable to any workman in respect of any matter specified in the Fourth Schedule, shall effect such change,-
(a) without giving to the workman likely to be affected by such change a notice in the prescribed manner of the nature of the change proposed to be effected; or
(b) within twenty-one days of giving such notice:
Provided thatno notice shall be required for effecting any such change—
(a) where the change is effected in pursuance of any [1][settlement or award]; or
(b) where the workmen likely to be affected by the change are persons to whom the Fundamental and Supplementary Rules, Civil Services (Classification, Control and Appeal) Rules, Civil Services (Temporary Service) Rules, Revised Leave Rules, Civil Service Regulations, Civilians in Defence Services (Classification, Control and Appeal) Rules or the Indian Railway Establishment Code or any other rules or regulations that may be notified in this behalf by the appropriate Government in the Official Gazette, apply.

Fourth Schedule reads as under:-

The Fourth Schedule
(see section 9-A)
Conditions of Service for change of which Notice is to be given
1. Wages, including the period and mode of payment;
2. Contribution paid, or payable, by the employer to any provident fund or pension fund or for the benefit of the workmen under any law for the time being in force;
3. Compensatory and other allowances;
4. Hours of work and rest intervals;
5. Leave with wages and holidays;
6. Starting alteration or discontinuance of shift working otherwise than in accordance with standing orders;
7. Classification by grades;
8 Withdrawal of any customary concession or privilege or change in usage;
9. Introduction of new rules of discipline, or alteration of existing rules, except in so far as they are provided in standing orders;
10. Rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment of workmen;
11. Any increases or reduction (other than casual) in the number of persons employed or to be employed in any occupation or process or department or shift, [not occasioned by circumstances over which the employer has no control].]

Regards
Thank you all for your timely replies. Just to be certain I understand...the employer can effect a change in wages if it gives the employee formal notice 21 days in advance of such a change. Is this correct?
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