Is It Legal for Employers to Cut Basic Salary While Keeping CTC the Same?

Dear members,

Query about CTC Structure Changes

This query is related to a basic component in the CTC structure. Recently, as per the PF commissioner guidelines from Mumbai, our company has made it mandatory for all employees to be covered under PF. Earlier, the company had increased the basic pay of employees who were not willing to be part of PF. Their basic pay was kept at INR 15,100/- or more for the last 2 years. However, recently, when the company was instructed to cover all employees under PF, they reduced the basic pay of all employees to 30% of CTC or the minimum wages as Basic. Now, our basic salary has been reduced to around Rs 9,000/- per month, though our CTC has remained the same. In our CTC structure, gratuity and bonus are shown as a part of CTC and calculated based on the basic salary. This has resulted in a decrease in the amount of gratuity for employees who have completed 5 years or more.

Legality of Reducing Basic Salary

Is it legal to reduce basic salary during the course of employment?

Hello, as I know, employers cannot unilaterally reduce an employee's basic salary during the course of employment without the consent of the employee. The basic salary is typically outlined in the employment contract or agreement, and any changes to it would require the mutual agreement of both parties involved.

If your company has reduced the basic salary of employees without their consent, it may potentially be a violation of employment laws. However, it is crucial to review the terms of your employment contract, any applicable collective bargaining agreements, and the specific labor laws of your jurisdiction to determine the legality of such a change.

In some cases, an employer may be able to change the salary structure or components of the compensation package, but certain legal requirements must be met, such as providing notice and obtaining the agreement of the employees affected. It is also important to ensure that any changes comply with minimum wage laws and other applicable regulations.