Is My Employer's New HRA Calculation Legal? Seeking Advice on Salary Slip Changes

My employer gave me a salary slip where the HRA is double the basic. Previously, it was done in accordance with the calculation of HRA being 50% of the basic in metros. However, suddenly my HR manager says that there has been a change in the salary structure, and hence the change. When I told him that HRA should not exceed the basic, he said it can be. Please clarify. I'm attaching the November salary slip, which is correct.

In the December salary slip, they made the following changes: basic= 6500, HRA=13530, other allowance=25070. Deductions: PF= 780, Prof tax=313, workers' welfare= 20, and removed the rest like medical reimbursement, etc. If you compare the November slip with the December one, can this be done by the employer? Please guide me; I'm planning to take legal action.

No employer can change the salary structure of an employee without intimating them and providing a written document for it. You can ask for clarification from their end.

Warm regards,

Sumiksha

Dear Ashwin,

There is no hard and fast rule that HRA should be less than basic. It is limited to 50% of the basic generally because of the exemption limits given in the Income Tax Act. However, a professional organization should intimate the proposed change to the respective employee and take their concurrence before changing the salary structure.

Srinivas L

Hi,

I agree with Srinivas. There is no hard and fast rule for HRA; it's purely the company's call where a Flexi Salary structure is not applicable. However, the employer must intimate the employee regarding any salary structure changes.

It is a live case to exemplify the functioning of Indian corporates and how employee benefits are sacrificed, and the company evades various taxes and statutory dues. Such practices should be condemned.

What is interesting is to note that the basic pay has been brought down to Rs. 6500, which is the ceiling of applicability of EPF Act. The implications of reducing the basic pay are numerous, including:

- the attempt to reduce payment of P.F. by the company. (In the exhibit, one can see how it has drastically reduced from Rs. 1650 to Rs. 780). This has a long-term impact on employees' finances and future financial security.
- the employee will have to pay more Income Tax as many benefits like Medical reimbursement, Conveyance allowance, etc., have been withdrawn.
- the contributory P.F. (12% of earlier basic pay) also enabled savings on Income Tax by the employee.

Raj, thanks for your response. What can I do in this regard? Do I have any recourse? Can I take this up with any authorities or can I initiate any legal action? Also, please let me know whether the HRA, which is almost double the basic (in December salary), is allowed as per the law. Just to add, all these changes were made without any prior intimation.