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Dear Raj Kumar ji,
With due respect to you sir, I submit my views as under:
Even in FTC, there should not be reduction in emolument. Negotiations should be for higher emolument.
I too heard about the reduction in basic pay by way of PUNISHMENT by Competent Authority in PSU and Government services. But in private sector, there is no such reduction in basic pay by way of PUNISHMENT.
In case of FTC consultant, you can negotiate for lesser emolument. However, in case of FTC employee, you can not.
I do not agree with you. According to my view, DA is a part of Salary. Salary means basic plus DA. We need not to mention the DA separately. Therefore, we call it basic consolidated component also.
In one of the postings by B. Saikumar (who is one of the learned contributing members of this forum), it is rightly said by him that the DA is that part of the component of salary which meant for neutralizing the erosion of basic wages by the cost of inflation.

Basic can be reduced by awarding punishment of with holding of increment in a disciplinary proceeding, not otherwise.It is possible not only in public sector but also in private sector If the standing orders provides it.

Dear Keshav
Thanks for taking pains to clarify certain points to the maximum extent possible. I appreciate your inputs.
All these discussions on the finer points will surely enrich our members. However, having gone to the farthest point; let us now come to the original query and restrict ourselves within its purview.
Here, the member is talking about a systemic, unilateral reduction in salary across the organization; and I think this point has now been more than adequately, covered.
Hope you agree on this.
Warm regards.

Dear Soma,
As "Basic Pay" and Gross (Total Salary or total emoluments), CTC are two different terms you should clarify these in your query to have clear understanding. In any case there cannot be any reduction in present Gross (Salary) However restructuring the Basic & DA and other allowances without overall reduction in gross is possible.

[QUOTE=varghesemathew;2033374]....................but also in private sector If the standing orders provides it.


Dear Varghese ji,

Greetings of the day!!!!

Rather than differing you, I would like to share my knowledge and understanding in this regards as under:

Prior to enactment of IE(SO) Act, the employer was free to fix the service conditions of his employees according to his own will. As a result of this there existed different sets of SOs / service conditions in different establishment. This Act i.e. IE(SO) Act has taken away this freedom of the employer.

According to me the certified SO shall be, so far as is practicable, in conformity with model SO. It shall make provision for every applicable matter specified in the schedule appended to the Act.

The matters provided in the schedule do not include the reduction of wages / basis wages etc. However, Sr.11 in the schedule includes any other matter which may be prescribed.

I have not come across any such SO in private sector which permits reduction of wages / basis wages. It is not in conformity with model SO. But GOD knows, there may be.... Any thing is possible.....

If you or any member / viewer came across any such inclusion, I request to share it to all.

What I mentioned is a workmen can be awarded the punishment of withholding of increment/s or reduction to lower scale .In both cases the basic is reduced. VARGHESE MATHEW
Dear Varghese ji,
I have not differed you. I again repeat, in PSU / Govt. Sector I have seen the reduction in wages / basic wages but not in private sector. If you know any such case in private sector, I have made request to you to share it. Because to my understanding and knowledge, in private sector there is no permit to reduce the wages / basic wages. Certified SOs can not have such provision, unless some one takes the advantage of Sr.11 in the schedule of SO Act which state:- "any other matter which may be prescribed".
According to the SO Act, punishment may be i. warning / censuring; or ii. fine in accordance with provisions of POW Act; or iii. suspension for not more than 4 days; or iv. dismissal.
Please take it as sharing of knowledge. If I am wrong, one can correct me.

Dear All my seniors,

I am extremely thankful to you all for sharing your knowledge and enriching me. I genuinely appreciate your kind efforts to clarify my doubts. However I will seek a little further guidance from your end.

First let me clarify the exact condition in my organization. In the Standing Orders of my company it is mentioned that the salary structure is subject to revision every 5 years. The same point is included in the appointment letters of all the employees, both regular and on FTC. As per the existing salary structure the range of basic was fixed for each of the grade with other components of the gross salary being adjusted accordingly. Now the management wishes to revise the structure, due revision in the coming FY, and fix the range of the gross for each grade instead of the basic. The basic and other components to be decided as certain percentages of the gross. In doing so the existing gross will not decrease. Though the majority of people will not suffer but there will be few instances where the basic salary, if calculated as a % of the gross, will become less than the existing basic as per the present structure. This is happening in both the regular & FTC cases.

E.g. Presently Mr. X gets gross salary of Rs.5000/- where the basic is Rs.3000/- and other allowances are Rs.2000/-. Now in the revised structure the gross range for his grade has been fixed as 5,000/- to 10,000/- and basic will be calculated at 30% of the gross. If Mr. X gets an increment of Rs.1000/- then his gross becomes Rs.6000/- and basic will become 1800/- which is less than Rs. 3000/-.

Now, if the basic cannot be decreased then how can the balance Rs.1200/- be adjusted ? You are kindly requested to suggest any remedial action for such cases only. Please be informed that the company is not going to reduce the salaries in general but want to implement the revised structure in the annual appraisal.

With regards,


Dear Soma,

This is exactly what I was predicting. However, normally the structure is made first the Basic and then other allowances as a %age on basic, say DA 30% of baisc, HRA 20% of basic, City allw.10% basic, Conveyance 10% basic and so on. Whereas your firm trying the other way round, putting the horse behind the cart. Generally this pattern is followed in Govt. and Govt. controlled PSUs, autonomous Estt. educational institutions etc. where govt guidelines are adopted in the matter of pay fixation and allowances. Even in private sector, modern estts. the concept of CTC is ruling these days. Nevertheless, your attempted restructure should not cause any problem for the purpose of EPF, ESI, Pension, Gratuity etc. as these are not calculated not on the Basic pay but on the salary, the gross where basic pay + other defined allowances are taken together in whatever name they are called. So there cannot be any ambiguity excepting that there could be some embarrassment among those whose basic pay is revised down wards as it may appear they have been degraded by the hidden effect. By the by what pattern of DA you are going to follow, is it on govt.declared CPI/WPI based indices or some thing else. I think your firm could have applied their mind on the breaking down of 'other allowances' as well, as it would be necessary for statutory compliance purposes.


Dear Sir (Mr.Kumar S.),
Thank you so much for your kind response.
Requesting you to kindly suggest a suitable way of calculating the salary where we can have a pre-decided gross and the components as % break-up without violating the statutory requirements. We do have the govt. CPIs. But would like to understand how to calculate the DA based on the same.
Please help me.

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