Seeking HR Advice: Can We Adjust Basic Pay Based on Salary Grades Without Legal Issues?

Dear HR Folks, I need your recommendations and inputs on the below. I have planned to propose to my employer to revise the Basic Pay based on the grading of the present drawing salary. The purpose of the proposal is to have an equitable structure in Basic Pay across the company.

Proposed Revised Basic Pay Structure

Grade Salary - Monthly CTC Revised Basic Pay Structure
G1 Up to Rs 30,000/- 30%
G2 Rs 30,001 - Rs 40,000/- 35%
G3 Rs 40,001 - Rs 50,000/- 40%
G4 Rs 50,001 & above 50%

1) Can I change the existing basic structure of the organization?
2) If the employees are drawing more than the minimum wage act, can I reduce that to as per the minimum wage?
3) Is there any law that prevents me from reducing/increasing the basic pay of employees if, during the time of joining, they were offered 50% as Basic?

Recommendations and suggestions are welcomed from everyone.

Regards,
J Keshari
[Email Removed For Privacy Reasons]

My answer to you in a single and simple sentence is: you can restructure the CTC but cannot reduce the basic component under any circumstances.

Please go through previous discussion threads on this topic. You cannot unilaterally change structures. Reducing salary to minimum wages will definitely get you into a mess (legal or otherwise).

Important Considerations in Salary Restructuring

While restructuring the salary, you should bear in mind one important thing: you cannot reduce the statutory salary at any cost. Statutory salary is the salary/wages as defined under labor laws. There are different definitions and various interpretations about the components of salary considered statutory, but basic salary and dearness allowance are the two components considered to be the wages/salary under all the Acts. Therefore, while restructuring, you should not reduce the basic salary and DA. If you do not have DA as a component of salary, just the basic salary should be taken as the base.

In no case should you reduce the basic pay of workers and make it equal to wages as per the Minimum Wages Act because under each minimum wages notification, there will be a mandatory clause that those who are getting more than the minimum rates should continue to get the same higher salary, and their salary should not be reduced to make it equal to minimum wages.

Normally, a pay scale contains only basic pay, and all the other components will be based on that basic pay. It should not be like deciding the whole amount first and then cutting it into different pieces like HRA, Conveyance, Medical Allowances, Petrol allowances, Incentives, etc. If you practice variable dearness allowance (at least for workers coming under the Minimum Wages Act), the same will have to be paid in addition to the basic pay. If the dearness allowance is fixed, the same will be a percentage of basic salary. By this, the DA will change with every increase in the basic pay. Also, the HRA can be a fixed percentage of basic salary which will again change with changes in basic salary. Conveyance allowance can be either a fixed amount for a particular grade of pay or it can be reimbursement which will be tax-friendly for those who are subjected to income tax. Whatever other payments are there can either be added to the above as allowances or as reimbursements.

Regards,
Madhu.T.K