Salary Restructuring Concerns: Can We Legally Adjust Basic Salaries for All Employees?

Dear All,

I have joined a real estate organization, and the taxation team pointed out that the current salary structure varied from individual to individual in the organization. In light of the same, we had a revised salary structure generated, which made the Basic salary range from 60% maximum to 50% minimum, going from the bottom grade to the top grade.

In light of the above, there are changes in the basic salary of quite a number of employees as the current rate of Basic Salary for most of them was 70 - 75% of the gross.

My Question is: Can we currently restructure the salaries according to the revised proforma for all employees? In case of a reduction of the basic salary, will there be any legal complexities? Please note that we have taken care of the PF aspect while considering this restructuring.

Seek your expert advice on this asap.

Regards

In any salary restructuring process, the main concern shall be to fix salaries that will protect the current package. Therefore, care should be taken to ensure that no employee receives less than what they were getting just before the restructuring.

You do not need to delve into the detailed aspects of PF liabilities because there may have been amendments in the law that could reveal any attempts to reduce PF contributions. If you decrease the basic salary to lower your PF contribution, the issue of Minimum Wages will come into play. If you raise basic wages to circumvent PF contributions, you might find temporary relief; however, if the PF salary is revised through an amendment, you will ultimately bear the burden.

When implementing a revised salary package, it should be applicable to all employees.

Regards, Madhu.T.K

Dear Shweta,

As for my experience goes, the basics should not be brought down from the existing amount. Even if there is any legal provision to alter and bring down the basic, I suggest not to do so because there are high chances of having confusions at the time of withdrawal/transfer by any employee who might move out of the organization. Hence, you try your level best not to alter the basic amount and alter other components of the existing salary structure.

With best wishes,

A V Ramanan:)

Let Me Explain........

Basic Salary is protected salary which cannot be reduced by any means because that is guaranteed cash. Most allowances are calculated on the basis of corresponding basic percentages. Restructuring does not allow you flexibility to reduce any privileges or customary concessions to be withdrawn.

Under these circumstances, you have to renegotiate salary with individuals, and an agreement shall be signed with each employee for acceptable terms of the renegotiated salary.

Regards,
Badlu

Dear Sweta,

I fully agree with the comments given by Madhu. If you want to increase the salary, you can add new components to the salary breakup which will be part of the gross and included in the salary slip. These components, such as Personal pay and Special Allowance, will act as adjustments to the salary.

You cannot reduce the salary of an individual at any point because the contribution towards PF will increase or decrease simultaneously. This exercise can be done when undertaking the Annual Increment Exercise, not before that.

Thanks,
Chitragya