How Does a 50% Salary Cut Affect Gratuity in a Private Stockbroking Firm?

After completing 6 years in a private stockbroking firm, the firm decided to reduce the salary to 50% and compulsorily reduce the basic salary on a pro-rata basis. This has happened in the last 3 months only. If I resign, how will the gratuity be calculated?

Salary Reduction in a Private BSE-Listed Company

In the case of a private BSE-listed company, can an employee's salary be reduced to this extent? The offer letter does not mention anything about all these; it only discloses the details in an 'annexure.'

Please help.

Salary Reduction and Legal Implications

There is nothing in law to prevent a reduction in salary as such. The PF Act only prevents a reduction to include the PF amount in the original salary. Of course, the salary has to be higher than the minimum wages. However, this reduction amounts to a change of terms of employment, so it can amount to an industrial dispute. If it is raised as an industrial dispute, then it needs to be resolved by conciliation.

Employees in a stockbroking company are not likely to have a union, so I think the possibility of it being raised as an industrial dispute is low. The revised salary is not effective unless you have accepted it. If you have accepted the letter of reduction without protest, then you are now bound to it.

Gratuity Calculation Concerns

Unfortunately, the Gratuity Act did not envisage such a scenario. It only talks of the last salary. So gratuity will be computed based on the last salary drawn (which is 50% lower). I think you can complain to the labor officer or authority under the Gratuity Act and seek his help, especially if you did not accept the changed salary.

If the company is in bad shape, you will probably find it difficult to get your money. In any case, adjudication will take a long time. Speak to your HR and try to convince the management to pay gratuity on the full amount instead of the reduced salary. Maybe they will agree.

Company Shift and Salary Reduction Concerns

The company is not in bad shape, but by shifting its focus to real estate instead of its core business, it now wants to get rid of top people. Even HR is aware of this and is in search of better opportunities. Based on the initial offer six years ago, the company kept promoting designations and salaries. However, all of a sudden, they want to reduce the salary by 50%, even discussing paying employees solely based on variables (performance-based at an individual level, even for top people). They are recruiting low-cost employees just to manage regional affairs.

The salary, reduced by 50%, gets credited to the bank account; hence, nothing is accepted, and no modified letter was issued. This has happened to people with rankings as well as regional managers and above.

Since the sector is going through a turbulent time, immediate change and achieving results have become a distant dream.

Kindly guide.

Well, it depends on to what extent you wish to go. If you wish to raise a dispute, then this is a ground available to you: I was not informed, my consent was not taken, and I did not agree. I started asking why I was getting half the salary, and I was told it would come later. Finally, I was told that I would only get 50%, so I resigned, and I want the balance salary (since I didn’t agree to half salary) and I should be paid gratuity on the full salary.

You can do the above if you are leaving because they will terminate you when you raise this type of dispute. (You can fight the termination, but in the meanwhile, you are stuck without work.) But then, do you have an alternate job?

If you continue working at 50% of the salary, then you are, in effect, accepting the change. (There is only so long you can say you didn’t agree but kept working at the new wage; it will amount to implied acceptance.)

The other alternative is not to fight with the company but look for another job that is offering better than what you have here. You will at least get your full and final settlement without hassle.

I agree with Saswatabanerjee, Senior Member.

Because the Gratuity Act mentions deduction on the last salary drawn, gratuity will be computed based on the last salary drawn if you have accepted that and if statutory norms permit reducing the salary to 50% lower.

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