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See....Reducing basic salary will not be having any legal implications but this will never attract anyone because in most of the organization the CTC hike normally given on the basic, basic affects a lot on ctc as most of the components calculated on the same........
thanks for the reply.
So you mean to say that we can reduce basic of those employees also who have less than 6500/- basic as long as it is more than 35% of the total gross salary.
Or it is advisable that we continue with same structure for basic less than 6500/- and alter structure of those who exceed the PF limit.
Another thing- are you sure percentage is 35% of gross?

Dear Rolly, I donot think any legal problems you would face. But for safety measures check your legal department. As per my knowledge, every thing depends on company to company
see rolly,

according to the pf act,basic can be 100% of the gross but should not less than 35% of the it depends on your company that what they prefer to decide the % of the varies company to company.

now come to your point.... if employee's basic is less than 6500/- then its mandatory to deduct pf from employee's salary.but if the basic is more than 6500/- then its depends upon the mutual understanding of employer and employee to deduct pf,in this case it is not mandatory.

you want to reduced the company liability towards employer pf.for that you can do one thing you increase the ctc of employee and deduct the employer pf from the employee account coz in ctc employer pf is included...........or you can reduced the basic so that employer pf reduced...............

but one more thing for both employees whose basic is 6500/- or less and whose basic is more than 6500/- ,basic % of the gross should be same.

now its your decision what you want to do in your company...........


Thankyou so much deepika n one thin more...
as you said - basic % should be same for all employees whether less than 6500/- basic or above pf cieling limit so are u sure you cannot have two salary slabs like say basic -60% for employees under 1.5 lacs p.a. salary and basic 50% for employees over 1.5 lacs p.a. salary.
Is it a legal violation?

It depends on company to company some could basic as 30% some as 60% etc But still I respect your reply.
dear rolly,

earlier i worte that basic % should be same,but i discussed with some higher person in account........... basic can be varies employee to can decide % of basic different for defferent employees.

now according to your can divide your salary in basic+hra+specil allownces........and one more thing,you want to reduced the company liability towards employer pf you can do one thing coz for those employees whose salary is more than 6500/- is not manadatory to give employer pf,but still they ask for this,just deduct employr pf from their salary acording to rule.....for this employer libility will not increase.

but very important can apply this rule to only new join employee,coz basis can not be change during employee's employement,anytime whenever you want.......when you are folowing your pervious rule,you will have to follow that rule for the pf.but if you want to reduced basic and add special allownces ,then releive the employee for one month,and again appoint him from stating to company........and apply your rule.

you can add in salary whatever you want(i.e. special allownces),but can not reduced basic in mid session,coz employees and employer pf will be reduced comparitively,and employees can object in this thing.

you can do following things:

1. deduct employer pf from employees salary.

2. cange your rules of leave enchashment,this you can change whenever you want.

3.deduct HRA and add this amount as special allownces.

still query,free to ask.........


Few points
- In this year increments. do not increase the amount in the basic. do it
on allowances or add few more componenets.
- for increment purpose check this-

Hi Deepika,
You have been a gr8 help n i am botherin you again.
Even i was kind of certain that basic cannot be reduced within the tenure of the employee n you clarified it as well.
The thing that i want to know that those people whose basic is above 6500/- and thus get fixed PF contri of Rs. 780/- can their basic be reduced for eg. from 20 K a month basic to 12K as their pf contri remains unchanged. Or for them also basic cannot be reduced. Hope i m clear.

dear rolly, could you make me clear about your example,i.e. reduced 20k to 12k and pf is not that i can help you out?wht you want to say? deepika

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