Facing Employee Pushback: Is Reducing Basic Salary for a Standardized Compensation Structure Fair?

Dear Friends, I am working in a medical devices company as AM - HR, and recently, I have designed a new compensation structure which is as follows:

Compensation Structure

- Basic: 40% of Gross
- HRA: 50% of Basic
- Allowance 1: 20% of Gross
- Allowance 2: Difference Amount
- Conv: 800

Gross = Basic + HRA + All1 + All2 + Conv

Now, after implementing this structure, I am facing huge resistance from employees as their basic salary is reduced now. Earlier, some employees were getting more basic, some were getting less basic as there was no structure or percentage.

Yes, we are deducting PF for all the eligible employees, i.e.,

1. For whom we were deducting PF earlier
2. Or those who now become eligible after reducing the basic

Now, I would like to know from all of you if it is right to reduce the basic to streamline/standardize the compensation structure. Please advise.

Thanks & Regards,

Jyoti Ansari

Impact of Reducing Basic Salary on PF and Gratuity

Reducing the basic salary has an impact on indirect components like PF and Gratuity, which employees might not be comfortable with. Even PF authorities question how the contribution is going down. Now that you have initiated a system, there will be resistance as employees feel that they are losing out.

Explain to them the need for a structure that is healthy. A good structure should have between 30-40% basic of gross. This will help the organization in the long run as their indirect payouts will come down over a period of time.

Regards,
Shweta
Erudite Management Solutions Pvt Ltd
[Phone Number Removed For Privacy Reasons]
[Email Removed For Privacy Reasons]