Is It Legal for HR to Cut Our Basic Salary? Seeking Clarity on Salary Reduction Rules

My name is Dehulkumar Tillu, and I have been working in the pharmaceutical industry for the past 4.5 years. Every year, we have received increments at our company. However, this time, our HR department reduced our Basic Salary from 50% to 40%. Is this reduction valid? Can Basic Salary be decreased according to the rules?

We are not in favor of reducing our basic salary. Could you provide a clear example of the rules or any applicable laws/acts in this regard?

Thank you.

No employer can reduce the basic salary and/or gross salary. It is illegal.

Understanding Basic Salary Regulations

The Act only states that the Basic Salary should not be less than the Minimum Wage, and any statutory action affecting the Basic Salary is forbidden. Kindly check with your HR department for the reason behind the reduction in Basic Salary. As rightly mentioned by Mr. Keshav, it is unethical.

Understanding Basic Salary and Minimum Wage Regulations

The basic salary should not be less than the minimum wage fixed by State or Central Authorities. There are instances where Dearness Allowance or Living Allowances are attached to the basic salary. In such cases, reducing the basic salary is a loss for the employee. If the changed basic salary is above the minimum wage and total receipts remain intact, then there is no damage.

First, study the implications of the change. One should not disturb the pay package. It is important to educate the employees. Sometimes, changes are made to avoid payment of taxes to the Exchequer, such as income tax, professional tax, etc. I advise checking with HR.

Regards.

As per the law, the Basic Salary should not be less than the amount specified in the Minimum Wages Act. If they reduce or increase it, there are no specific rules and regulations governing such changes.

In my opinion, if they reduce your basic salary, you might get some relief from tax because the basic amount is fully taxable.

I suggest you look at the increment hike rather than focusing on the basic hike. Basic salary is just one component of your entire salary structure. Ultimately, what matters is the total salary that goes into your pocket.

I also agree with Mr. Aditya's comments that reducing the basic salary will provide you with more benefits in terms of income tax.

Thank you.