Dear sir,
Kindly suggest me that company can reduce the basic salary of employees ?
our management want to change the salary structure of worker, at present no any allowance in the worker salary. So, we want to change the salary structure with allowance like HRA, DA, edu. etc.
please help me...
Dashrathsinh Jhala
Executive HR & Admin

From India, Ahmadabad
Consultant & G.m.
+3 Others

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In terms of sec.9-A of the Industrial Disputes Act, the employer need to give 21 days notice to the workmen if he efects any change in his wages more so when the change adversely affects the workman.
HR & Labour Law advsior

From India, Mumbai
Sharmila Das

Thank you for the info Mr. Sai kumar...!!
Are you mentioning the following as per the source Section 9A in The Industrial Disputes Act, 1947

From India, Visakhapatnam

If you have not restructured so far, and this is the first time you are restructuring, care need to be taken. Law does not say that managment can not reduce salary. ID act says that conditions can be changed by giving notice under sec 9 a.Following need to be examined beforw giving proper advice.

1. Have you ever signed a settelemnt?

2. Do you have Union? If so How many?

3. If you do not have union and if you have not signed a settlement. how do you manage changes every time?

4.How many workmen are there?

5 What is the present structure?

6 What is the structure you follow for Management Staff?

7. How old is your Unit?

8 Are you covering them under PF and ESI

9 What is the Bonus percentage you pay now?

10 What is the struture being followed in your area?

11. What is the reason to restructure now?

A few questions may be added to the list. Write down all, and specify two objectives for restruturing now.

If you have Union, you need to discuss with them

If you have signed a settlement, 9 A notice need to be given

If you do not have any such thing like union or a settlement, legally you need to give 9 a notice. However, you can mange internally and if all employees sign accepting the cha nges, you can proceed.

I suggest, you jot down all details, and if necessary consult a local IR Expert and implement.

It is not correct to say that basic can not be reduced. It is a misconception. You need to follow certain procedures and also work out a good strategy for convincing people


T Sivasankaran

From India, Chennai

Dear Dasrath,
It is not correct to say that basic can not be reduced. It is a misconception. You need to follow certain procedures and also work out a good strategy for convincing people. There are some points :
1 - Do you have fix limit of PF contribution as per PF Act e.i. 780/- on wage ceiling 6500/- if yes than no problem . basic can be reduced, but if your company is deducting PF more than 780 per month e.i. more than wage ceiling, than you can not reduce the basic salary of the employees without to inform to PF authority because PF can not be affected ( less than previous month contribution). PF deduction may be less than earlier from new return period not in between April to March.
2 - The basic salary can not be less than current minimum wages.
3 - Workers should be informed by the management as per section 9A e.i. Notice of Change (ID Act 1947).

From India, Delhi

With due respect I must submit here that PF or ESI Acts have no bearing on fixation of wages. Wage is primarily guided by Minimum Wagees Act and ID act for any change. T Sivasankaran
From India, Chennai

Dear All,
Thank you very much for suggestion.
we have faced the problem in Gratuity payment because current basic is less than previous. So, how we can pay Gratuity ? because employee demanded gratuity on previous basic.
we have taken signature of our employees on revised salary structure ( it made with allowance ).
please reply...

From India, Ahmadabad

Dear All,
It is always better to give proper notice to all employees concerned/ obtain their consent/sign bipartite agreement, notwithstanding whether or not there is enough provision in law. This is especially required to satisfy the provisions of "Law of contracts" as every one is governed by certain terms and conditions whether oral or written, implied or explicit. And more so any attempt to tinkering the basic pay would automatically attract EPF/ESI/Gratuity and other Acts. And therefore proper notice and consent are necessary to disprove mala-fide intentions, if any. Nevertheless it is beneficial to bifurcate the emoluments into acceptable, Basic, DA, HRA, CCA, Bonus, Pensionary benefits, and so on. Especially diff.Acts define salary/wages/remuneration with diff. connotations. A caution - Employees/Unions should study the proposals with utmost care sensing repercussions.

From India, Bangalore

I have quoted the same provison which you have shown in the link. Even assuming that the total wages which an employee is paid , is not reduced because you are granting him other allowances like conveyance to compensate for reduction in basic, yet the empoyee may still contend that he has been adversely effceted by bringing up issues like gratuity which you just cited or any benefits linked to basic pay and try to overturn your action as being violative of Sec.9-A.Since you have taken signature of the employee in token of having consented to the change, it should not cause any problem now so far as gratuity is concerned.
HR & Labour Law advsior

From India, Mumbai

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