Dinesh Divekar
Business Mentor, Consultant And Trainer
Madhu.T.K
Industrial Relations And Labour Laws
B K BHATIA
Director Of Company
SATISH KUMAR DHANWAL
Sr. Manager (hr)ntpc Ltd., Noida
Trrajeesh
Labour Enforcement
Rajsinghphogat
Labour Law Consultant
+4 Others

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Dear All, I have one query related to employee’s salary. Can employer reduce the salary of any employee in any circumstances? Please advise.
Dear Nikita,
When you ask some query, business etiquette demand disclosure of your complete name, designation, reason for asking this query etc.
Yes you can reduce the employee's salary. If it is because of demotion of employee then that demotion should be because of punishment. This punishment you can award after conducting domestic enquiry and following normal legal process.
You may reduce the employee's salary because of the poor business, low demand etc. But then there should not be variation in reduction i.e. for same designation there should be same percentage reduction. As far as possible, it should be across the board and no person should be left out of this reduction. Secondly, as Prashant says, you cannot pay anything below minimum wages.
In any of the above two cases, you cannot reduce the basic salary. Basic component of salary remains as it is.
Ok...
DVD

The deduction in salary should be in accordance with the provisions of Payment of Wages Act.
Without valid reasons the wages fixed as per the appointment order or terms of settlement accepted or binding on the employee should not be reduced. It is okay if it is done as part of disciplinary action provided the standing orders provides such kind of punishment. This includes reduction in wages due to poor performance by the employee. If the performance of an employee is found to be bad he should have been given an opportunity to improve or necessary disciplinary action like conducting of an enquiry etc, should have been done. Moreover, the social welfare legislation like EPF Act, ESI Act provides that the wages of employees should not be reduced.

In a scenario like loss of market or recession, if the employer finds that the wages are to be reduced the same should be intimated to the employees at least 21 days of its implementation following section 9A of the Industrial Disputes Act which tells that conditions of service should not be changed without giving the employees at least 21 days notice.

Regards,

Madhu.T.K

The provisions of the ID Act and the payment of Wages Act has to be followed. I agree with the views expressed above by HR professionals. Another mode is by way of proper Domestic Enquiry as punishment provided under the Certified Standing Orgers of the Company. There does not come to my mind any other provision vide which salary can be reduced. Basic principles of Natural Justice has to be followed before taking such an action by the employer which are inherent in all the Labour laws.... Satish Kumar Dhanwal .
yes, Employer has right to reduce the salary only in exceptionla cases, not always. there should be prima facie to be proved under law for time being in force.
Dear Members,
You have already given the correct legal position.
I will only mention that cetatain Indian Co's did resort to reduction in salary when going was tough few years back and these included reputed Indian MNC's also.
Col.Rathi

In a Govt. organization, NO (except as an authorized penalty). But in private sector, especially the non-listed companies, the employer has all the rights to increase/ reduce the salaries of employees based on their performance & discipline. Only some processes have to be followed to make any downward revisions legally viable. For example, consistently poor performance of the employee with recorded counseling justifies reduction in salary. In fact, the employee can be shown the door since one has no reason to stay when one can not deliver performance.
To my mind, there are no rights & privileges for non-performers in any organization. There is no security of service for this category of employees.

Dear All,
Reduction of salary entails the statutory compliances such domestic enquiry for the misconduct or indiscipline following the Law of natural justice in the enquiry proceedings. In all reduction in basic pay, and DA can not be done without the enquiry proceedings as these constitue the reduction in wages as prescribed in the payment of wages Act.
More over where ever some incentive allowances are given to the employees which are linked to the performance of the employees those can be reduced by giving statutory notice without holding he enquiry proceedings.
Invariable the statutory notice is to be given under the Industrial Dispute Act, 1947 which ever way of the reduction of salary may be.
Thanks to all.

salary cannot be reduced during the period of employment at all until and unless it is done as punishment after due domestic enquiry and as the terms and conditions of Offer of Appointment.. Minimum wages question as indicated above does not arise at all once salary is fixed as per the offer of appointment. Of course , the laws pertaining to minmum Wages has to be complied while fixing wages. It can't be less than that under any circumstance.
The facts are not mentioned. It is just a generic question. Full facts should be stated to enable the answeror to give proper reply keeping in mind the facts and the law applicable.


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