Remodelling Salary Structure As Per Present Trends

hi,
I think you want to control the company overheads due to huge basic pay of your executives. Reducing basic pay will reduce their HRA, Gratuity, PF and all other allowances related to basic pay. It may de motivate your employees. What you can think of doing is that future increases need not be added to basic pay. Either introduce new allowance whic does not have an impact on other overheads such as PF Gratuity HRA etc. or otherwise you can give your executives ad hoc increases every year depending on their performance.
Vincent

rolly,
its true that the person,who is out of pf and esi,his basic can be modified...........but if you are providing gratuty for your employee.then definately it will reduced if you will reduced basic(and morever we cant change basic in this case)............so the solution is that dont change in basic for old employees.just increae their salary according to the performance in coming months and show that incresed salary as a special allownces.
but for the new joinees ,you can change your salary break up status.
deepika

Hi Rolly
As per my info. about labour laws related to PF and ESIC one can not reduce the basic. even if you do so and in any of Govt Inspection its comes up you need to give lot of explanation to it, as y u did it and even show (proof - hard copy) of this action :)
regards
Amit

Hi Rolly,
Most of the companies workout to make their Payroll a structured one in order to avoid any confussions.For eg .in my company, 40% of CTC is considered as Basic; HRA= 50% of Basic; Covance Allow=9600pa(fixed); Mobile Allow= 15000 Pa(fixed); Rest Amt as Special Allow.
Always keep in mind Low is the Basic Less will the Liabilities for PF;Gratuity and ESIC calculations from Companies pt. of View.
Thats the reason Why generaly companies keep Basic % ages between 35%-45% So that Companies Liability against Statutory compliances can get reduced.
Being HR we have to think and act keeping in our mind all the view points of Companies as well as Employers.Hope this will help you out to restrucure your Salary Structure for the company in right way!!!!
Regards,
Rachna Sinha
Hyderabad.

Hi Rolly,
Pradipta is right, th eonly issue you will face here is the PF amount. You cannot reduce the PF amount. Which means if you reduce the basic you will still be paying the same PF amount.
PF amount cannot be reduced, incase the basic reduces you need to maintain the PF amount as it is.
Regards,
Resha

Hi Rolly,
One thing you can experience after this is employee dissatisfaction...
Why?
because it will reduce Employer's PF contribution and futher more will reduce the total PF contribution to an account as it is based on the basic salary of an employee.
Better , introduce or restructure you salary structures at the time of salary revisions. Then, you can add such allowances by keeping base salary the same.
Regards,
Upasna Kaushik

As far as my knowledge goes, you can reduce only to extent ,on which you were paying PF percentage earlier.The Act says that Pf contribution should not be reduced in any case.
For eg if someone was getting 20K as his basic and you were paying only Rs 780 as his Pf (6500*12/100) then you can reduce its basic to 6500but if your were paying Pf on 20K i.r 20000*12/100 then you cannot reduce the basic.
Regards,
Anu

Well guys..one thing more which was also discussed alittle earlier in the discussion-
If we contribute PF at the rate of 12% and employee crosses 6500/- basic so can we limit him to fixed PF contri of Rs. 780/- or we will have to continue to contribute at 12% on actual basic.
Rolly

Dear rolly,
As i told you earlier,There is no PF ceiling limit like 780/-.if employees basic exceed 6500/-or less than or equal to 6500/-,yet employer and employee pf will be deduct as per 12% of basic.
Deepika

Hi deepika,
Well actually i spoke to few of my colleagues on this and as per them also their companies are giving PF on 6500/- only even if the basic is more. Same is there in our company. And the reason they all gave is 6500/- cieling limit which is not mandatory but is a option provided by PF . You may continue to contribute on actual basic or limit it on 6500/-
Rolly