Navigating Salary Cuts in a Textile Company: Seeking Advice on Fair Reduction Strategies

Hi! I am working in a Textile (Manufacturing) company having 300 staff members. In the current economic recession, my company has decided to cut down the Salary Cost by 5% to 20% keeping in view the Salary of the Employees. I need the following clarification from the Seniors - 1. Can we reduce the Basic Salary of anyone? 2. Our maximum employees are getting Basic Salary more than Rs. 6,500/- P.M. 3. The employee's P.F contribution is being deducted 12% of his Basic Salary even getting more than Rs. 6,500/-, and the same amount is being deposited towards the employer's contribution. 4. What Standard should we adopt to reduce the Salary such as - 1. Should we go for a different flat reduction ratio of Salary Slab? 2. Should we go for a different flat reduction ratio of Level-wise (Designation)? 3. Should we go for a flat reduction equal ratio for overall employees? Please let me know about any other options. Thank you, Anurag

Hi,

Basic cannot be reduced at any cost. You will have to make a deduction in allowances other than basic and DA. The percentage can be decided based on levels or grades. The higher the level, the higher the deduction. Try to reduce the components that are taxable so that even if there is a salary cut, some tax-saving is also done, resulting in reduced tax. This way, the net salary will have a very minimal effect.

Regards,
Harshad

Hi,

I wouldn't really advise a reduction of Basic Salary. You may look at reducing the other allowances and benefits that employees get.

As far as the percentage is concerned, you may have different percentages for employees in different bands (viz. top management, middle-level management, team leaders, and officers/executives). A higher percentage may be considered for employees in higher bands as compared to the lower ones. The percentage may vary depending on the target of salary cost cuts that you have received from your top management.

Hope this helps.

Hi all,

Can somebody please help to draft a letter of demotion for an HD Mechanic? This is very urgent, and I need to submit it by tomorrow. Your help is highly appreciated.

Thanks a ton.