Can We Revise The Basic Pay Based On Salary Grading - CiteHR
Madhu.T.K
Industrial Relations And Labour Laws
Saswatabanerjee
Partner - Risk Management
Korgaonkar K A
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+1 Other

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Dear HR Folks,
I need your recommendations and inputs on the below.
I have planned to propose my employer to revise the Basic Pay based on Grading of Present drawing salary.
The purpose of the proposal is to have equitable structure in Basic Pay across the company.
Grade Salary - Monthly CtC Revised Basic Pay Structure
G1 Up to Rs 30000/- 30%
G2 30,001 - 40000/- 35%
G3 40,001 - 50000/- 40%
G4 50001 & above 50%
1) Can change the existing basic structure of the organization?
2) If the employees are drawing more than the minimum wage act, can I reduce that to as per minimum wage?
3) Is there any law: I can not reduced/increase the basic pay of employees, if during the time of joining they were offered 50 % as Basic.
Recommendation and suggestions are welcomed from everyone.
Regards,
J Keshari

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Dear Queriest, My answer to you in single and simple sentence is, you can do restructuring CTC but can not reduce the basic component in any circumstances.
Please go through previous discussion threads on this topic. You can not unilaterally change structures. And definitely reducing salary to min wages will get you I to a mess (legal or otherwise)
While restructuring the salary you should bear in mind one important thing and that is, you cannot reduce the statutory salary at any cost. Statutory salary is the salary/ wages as defined under labour laws. There are different definitions and various interpretations about the components of salary which are considered as statutory but basic salary and the dearness allowance are the two components which are considered to be the wages/ salary under all the Acts. Therefore, while restructuring you should not reduce the basic salary and DA. If you do not have DA as a component of salary, just the basic salary should be taken as the base.

In no case you should reduce the basic pay of workers and make it equal to wages as per Minimum Wages Act because under each minimum wages notification there will be a mandatory clause that those who are getting more than the minimum rates should continue to get the same higher salary and their salary should not be reduced to make it equal to minimum wages.

Normally, a pay scale contains only basic pay and all the other components will be based on that basic pay. It should not be like deciding the whole amount first and then cutting it into different pieces like HRA, Conveyance, Medical Allowances, Petrol allowances, Incentives etc. If you practice variable dearness allowance (at least to workers coming under Minimum Wages Act) the same will have to be paid in addition to the basic pay. If the dearness allowance is fixed, the same will be a percentage of basic salary. By this the DA will change with every increase in the basic pay. Also, the HRA can also be a fixed percentage of basic salary which will again change with changes in basic salary. Conveyance allowance can be either fixed amount for a particular grade of pay or it can be reimbursement which will be tax friendly for those who are subjected to income tax. What all other payments are there can either be added to the above either as allowances or as reimbursements.

Regards,

Madhu.T.K
As very well explained by Mr.Madhu Basic can never be reduced.
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