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Hi Soma

As far as I can see, there is no specific provision in law that you can not reduce basic or even the total salary that you pay to an employee. Make sure that the basic + DA + Special Allowance is more than minimum wages. Only other rule that applies is that amount of PF can not be reduced. However, even that rule applies only for statutory limit of PF amounting to Rs. 780 per month. If your basic is above 6500 per month, then reduction will not affect PF

That given, there are other factors that apply.

If you reduce wages, it can result in an industrial dispute.

In your case, the agreement is being approved by the employees and the union, so that would not be a problem. In general employees are more concerned about take home pay, rather than basic.

Some times people try to make trouble simply by taking advantage of a gap they perceive. So you may have investigation by the authorities who will harass you on this matter. One way out is to get approval of the concerned labour officer for your settlement.

Dear Sir, Thank you very much for the kind explanation. Sir, may I request your kind-self to guide me on how to calculate DA from CPI. With regards, Soma.
Generally the notification from the government will have the working of how much of DA is to be given.
In case of minimum wages, the increase is specified. you can use the same ratio of increase in DA of minimum wages with reference to the wages are you paying.
The DA increases are announced every 2-3 months by the government, separately for urban and rural and industrial workers. They also announce DA increase of central government employees. You can get the information from NIC and from published reports in newspapers

Dear Soma,
I have attached a few notes on the history of DA, especially followed in govt.sector, unionised industrial houses etc., the recent salient features of WPI & CPI and indices applicable for the present and notification together with the links which would help you to surf thro' for relevant information and guidance. If you have to follow the govt.pattern of pay, scales of pay, FDA, VDA and other allowances you should buy a copy of "Swamy's Hand Book 2013" from the book sellers where in you'll get all information about pay, DA, allowances, tax matters and so many other aspects of law. If you would have any specific queries you may raise them here.
All the best.

Attached Files
File Type: doc Dearness Allowance in India-The history.doc (51.5 KB, 225 views)
File Type: doc CPI.Jan.13.doc (4.81 MB, 107 views)
File Type: doc The concept of WPI & CPI-DA Fixation.doc (73.0 KB, 175 views)

Dear Sirs (Mr. Banerjee & Kumar S.),
Please accept my sincere thanks for the valuable guidance and inputs provided by you. This will definitely help me a lot to complete my assignment.
With regards,

I have checked the Minimum Wages and have found that the basic + da for most of the executive position is more than 7000. ie. (Basic 5000/5500+ DA1576/1600). These rates were found in Maharashtra Minimum Wages Jan 2013-June 2013. Can an Organization have basic pay less than the amount mentioned above for such positions. Am still confused. Can any Organization have basic pay as 1800/2000/3000 etc. Will that not be going against the statutory compliances.

This matter is being debated in the court at the moment
However, according to me, where the notification clearly lays down the how much is the minimum wages in terms of basic and da, you have not justification really in having it lower

Dear all
Reducing the basic salary/wage of an individual to whom the Industrial Disputes Act applies, whether it affects his gross salary/wage or not will amount to a change in the conditions of his service and will amount to a violation of Section 9A of the Industrial Disputes Act.
With regards

Does that hold true where the workers are agreeing to the restructuring ? This is (from what the post says), not an unilateral action
Dear friend,

There is no rules or guidelines legally how much should be the basic pay and how much DA & other allowances. What is minimum wages under the act is the total emoluments i.e.Gross salary or wages which means Minimum Wages Act doesn't prescribe basic, DA & other allow. There is no restriction that Basic pay should be more than the DA or vice versa. In fact many organisations, banks etc have their DA & allw. more than the basic pay. There are instances where DA is reduced when the "reverse inflation" is reported but there is no instance that basic pay is reduced excepting as a punishment. In some cases as a punishment those found guilty is refixed/relegated to a lower pay scale (taking a lenient view instead of dismissing) in order to secure/retain them in the employment. In some cases firms when reported as "sick industry" & facing closure etc. employees come forward to lower their salary in order to save their employment & their industry as a mark of livelihood & to revive their bread winner industry to be rehabilitated. That's why Many employers merge part of the DA with Basic pay so that DA is refixed after merging with basic and accordingly periodical wage revision agreements are made with employees' unions. However increasing the Basic pay means,it' has got it's own repercussions as most DA and allowances are indicated as certain %age on Basic pay and thus increase the overall wage bill of employers. However lowering the Basic pay at best could be one of the rarest of rare cases only.


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