Avinash has taken a little simplistic view of your case. Anyway, the replies to your questions are as below:
Question 1 Can we reduce salary of the demoted employee?
Reply: - Yes, you can reduce the salary of the demoted employee. The definition of demotion is "assign to a lower position or reduce in rank". It will be inconsistent if you just reduce the rank but not the salary.
Question 2 In the demoted salary he will be part of PF and ESIC so can we start PF midway in the job? What about date of joining of the employee of PF records?
Reply: - In spite of demoting the employee, he/she continues to remain on the rolls of the company. Therefore, the date of joining will remain same. There is no question of starting PF midway in the job as you must be deducting the PF from his salary even before demotion also. However, please do not reduce the basic salary. This is because if you reduce the basic salary, then PF contribution also will get reduced in that case PF Enforcement Officer may raised observation against the reduction on the PF contribution.
Question 3 Is there any specific compliance related process to be followed in case of demotion?
Reply: - "Demotion" is a punishment. Before awarding this punishment, you need to order the domestic enquiry. In the enquiry the accused employee must be given a chance to defend his/her case. In the enquiry findings if the misconduct is established, then only the punishment can be given. Demotion is a serious punishment and it cannot be awarded on the reply that the accused gave to the show cause notice issued earlier.
11th September 2019 From India, Bangalore
I'm afraid that demotion may not be the correct move here, as there are too many complications or there is an objective for gradual constructive discharge of the employee.
The first point to be checked is whether, as part of the employee appointment letter, had it been mentioned that demotion could be executed as part of the performance management plan. Normally companies only mention that a performance improvement plan would be initiated and if it is not satisfactorily closed, then exit formalities would be initiated. If demotion is an option, this needs to be mentioned as well.
Another area to be checked is whether the company policies on performance management reflect any details on demotion on account of poor performance. If both the appointment letters and company policies do not have any details on demotions, then it is strongly advised, that demotion be dropped as an option.
The reason here is that when demoted, justification is required on to which position to the demotion has occurred and as to whether the employee is fit for that position. If the scenario is one where the employee had been promoted earlier and then is demoted now, then more of complications arise on whether there had been any changes in the job specifications over a period of time or as to why the employee is suddenly considered as a non-performer.
There are a lot more of details to be considered, but to keep this short my opinion is that it is not easy to prove the justification for a demotion in a labour court if the correct paperwork is not in place.
18th September 2019 From India, Bengaluru