Umakanthan53
Labour Law & Hr Consultant
RAKESH DUBEY ONLY
Working With Raymond's Group Thane

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Management planned for reduction of salary of employees except labour/driver category, reduction is on the basis of different percentage for Sr. Management, Middle Management and other staff.
Please advise me for the following points.
1. What percentage would be justifying for different category, so that not to affect survival of employees.
2. Reduction would be made from CTC or gross salary or from only basic salary?
3. How can we introduced effect it on Payroll system.
Regards
Rakesh Dubey

From India, Raipur
Dear Rakesh Dubey,

Irrespective of the category of employees, basically, reduction in existing salary of employees at the instance of the employer for whatever reason is a modification of the existing terms of the contract of employment.

So far as the "workman" category of employees, they have got the statutory protection against such unilateral modification to their disadvantage through the provisions of Section 9-A of the Industrial Disputes Act,1947. But in the case of other categories of employees, it becomes a choice of " take it or leave " and as such it has got its own ramifications resulting in huge repercussions on the employees and the industry as well. Therefore, your first two questions are very pertinent particularly in the context of compulsory lockdown ordered by the Central and State Governments due to the outbreak of COVID-19 under the provisions of the Disaster Management Act,2005, the Epidemic Diseases Act,1857 and the Indian Penal Code,1860 and upheld by the hon'ble Supreme Court of India. What is more disturbing on the whole is the impact of the lock down on the economy of the country which is already in shambles due to various reasons both international and domestic. The economic forecast of a year or two following this disaster seems to be alarming bearing a semblance to the great depression of the 1920. Therefore, developing countries like us have to be more cautious tightening our belts to the possible extent in the short run in order to protecting employment in the long run.

The mode of reduction of salary proposed by your management differentiated on the senior, middle and junior levels of management seems to be reasonable and fair. But at the same time the actual percentage of reduction should not cause resentment so as to tempt talented people to choose premature exit.Without knowing the existing salary structures of different categories of managerial/administrative employees of similar industries in general and your industry in particular, I think that one would not be able to suggest anything concrete. How long this reduction has to be in force is also another important aspect. This requires a thorough knowledge of your products or services, your existing market share, capital reserves, average age of each level of employees, the difference between the highest paid workman and the lowest paid supervisor/ administrative executive etc. Thus I would opine that the reduction may be at 25% to 30% for senior managers, 15% to 20% for middle level and 10% to 15% for junior managers for any definite duration like one year with an assurance to resumption.

In my opinion the reduction may be introduced on the gross salary only. Whether it is only on basic or on allowances or both depends on the componential structure only. It is also very important to assess the impact of this reduction on terminal benefits of employees who are likely to retire on superannuation during the period of reduction and make some safeguards in place.

From India, Salem
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