Can Companies Cut Agreed Employee Benefits Without Notice? Let's Discuss!

Hi there, I just wanted to ask: Can a company reduce the benefits (Provident Fund, Health Benefits, Gratuity Amount, etc.) of its employees that were agreed upon at the time of their employment without giving a proper notice?

Dear,

Of course, your question is not clear. You do not want to share the complete story and want to know the solution. From your question, we can only say the company should not reduce benefits.

Thanks,
J.S. Malik

Yes, statutory benefits cannot be reduced once they are provided, and these benefits depend on the employee's salary. The salary of an employee can be reduced accordingly with benefits. There are some benefits called extended benefits; these can be withdrawn at any time by just informing. Examples of extended benefits include shuttle service and medical insurance, among others.

Thank you.

PF, Gratuity, and Medical are the statutory benefits to which each employee should be entitled. These are the standard benefits that the employer provides to employees. They cannot be modified or changed.

I agree with Suresh & Somasekhar that benefits envisaged by statutory regulations can't be reduced. Organizations can reduce fringe benefits such as mobile, shuttle, etc.

Please let me know if you need any further assistance.

Please note, the benefits can be reduced unless you are covered under the Employment State Insurance (ESI) Act, Provident Fund (PF) Act, or other statutory compliant laws. If you fail to fall within the purview, the company can reduce your salary. This rule applies only to employees under the staff category. Typically, individuals working in software, airlines, or multinational corporations (MNCs) receive generous salaries. Therefore, in their case, salaries can be reduced for roles such as Assistant Managers (AM), Deputy Managers (DM), Managers, Senior Managers, Directors, etc.

You seem to be in a real fix. Morally, this shouldn't be done, but there are many companies that are doing it, taking the slowdown as an excuse. You need to understand that most of these benefits are fraction percentages of the basic salary. So, instead of reducing these benefits, reduce the basic salary (if you must); these costs will automatically be reduced. However, you must clearly communicate this to your employees before you proceed to do this.

Regards,
Team GroupHR
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Dear All,

Thank you for your replies. Although I do agree with the point where economic slowdown is made an excuse to reduce benefits such as medical and gratuity, in my particular query, both of these were drastically reduced, obviously attracting frustration and criticism. I guess it's wrongful on the company's part.