Management Consultancy
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Can company reduce basic pay of an employee?
Basic Pay can be reduced as a punishment imposed on disciplinary action. Otherwise, one has substantive right to his basic pay earned and it cannot be reduced except through legal process.
Dear colleague,
Basic salary represents relative job value in job hierarchy and cannot be reduced even by way of punishment unless it is provided for in the certified standing orders or service rules. Some S.O.s provide for stoppage of increment or reverting to earlier basic in case of demotion. But reducing basic through legal process is Herculean task and is next to impossible.
Vinayak Nagarkar
Legal proceeding: please share the process involved
Dear colleague,
The information provided by Mr Nagarkar is justified. The employer can not reduce the Basic salary of one at whims.
The subjected employee can file a case before the labour authority of the area where the establishment is existing.
Does this basic pay means the basic applied under minimum wages? or basic that is being given above the standard rate? If it is above the standard rate of given basic pay as per minimum wages, can then be reduced?
Dear colleague,
It is both.
Vinayak Nagarkar
Dear Friend,
Also needs to understand why has the need arisen for reduction of basic pay to an employee?
Simply it cannot be as suggested by Seniors here.
Dear Members,
Is there any issue if a person joins a new company on reduced salary that what he is drawing in his previous organisation.
The background to this question is that there one person who has shown interest in joining my organisation at a lesser salary that what he is drawing presently due to some compelling personal reasons.
We have made it clear to him that we cannot afford to pay him anywhere close to his present salary, but he is still keen, and so are we to have him onboard. But his PF contribution will be lesser than what he is contributing presently, will that be an issue?
Dear colleague,
We are discussing here the of reducing basic of existing employee.
In your case, the person is on his own volition wants join on lesser salary than his previous, and knowingly take lesser PF contribution. So no issues.
Vinayak Nagarkar
Thank you Mr Vinayak for the prompt reply.
Can other salary components be reduced like HRA or any except Basic..
please suggest
Dear friend,
When minimum wages and employee net take home is not disturbed,you can make such necessary changes in other components like HRA,Conveyance beyond Basic and DA, as both the components are considered for calculating EPF,Leave encashment,Bonus etc.
But do it duly informing the employees and also be prepared to explain the circumstances for such change to them.
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