Salary Reduction During Increments: Is It Legal and Are There Any Case Laws Against It?

Inquiry on Salary Reduction During Increments

Is it permissible if an employee's basic salary is reduced while formulating the increments? If it is an unavoidable situation, is there any case law that prohibits the reduction of the current basic salary?

Regards,
PBS KUMAR

Well, Mr. Kumar, this question has already been raised and discussed here. Please visit the web link below:

- https://www.citehr.com/133851-can-ba...y-reduced.html

I don't think one should opt for a deduction in Basic salary instead of making deductions in other allowances if it is required. Also, there is no such rule, and I have never come across any that states you can't reduce the Basic salary.

Unless it goes below the basic prescribed in minimum wages, no law is protecting the reduction in basic, I think. Let us hear the opinions of lawyers in this forum.

Regards,
Pon

Section 12 of EPF: Employer Not to Reduce Wages

Section 12 of the EPF states: "Employer not to reduce wages, etc." No employer, in relation to an establishment to which any Scheme or the Insurance Scheme applies, shall, by reason only of their liability for the payment of any contribution to the Fund or the Insurance Fund or any charges under this Act or the Scheme or the Insurance Scheme, reduce, whether directly or indirectly, the wages of any employee.

Regards,
Rahul Bagale

Not only does PF, but also gratuity, get affected by a reduction in Basic. So, this aspect has to be taken into consideration.

Thank you.

Here is the act:

Section 12 - EPF - Employer Not to Reduce Wages, etc.

No employer in relation to an establishment to which any Scheme or the Insurance Scheme applies shall, by reason only of his liability for the payment of any contribution to the Fund or the Insurance Fund or any charges under this Act or the Scheme or the Insurance Scheme, reduce whether directly or indirectly, the wages of any employee to whom the Scheme or the Insurance Scheme applies or the total quantum of benefits in the nature of old age pension, gratuity, provident fund, or life insurance to which the employee is entitled under the terms of his employment, express or implied.

http://epfindia.nic.in [<link updated to site home>]

Regards,
Rahul Bagale

Normally, wages cannot be reduced, as has already been enumerated above. However, there have been a few dynamic cases wherein CEOs have reduced salaries by 30-50% across the board instead of reducing headcount. In cases involving mergers, terms and conditions are also changed.