In My Offer Letter My Basic Is High While In The Recent Appraisal Letter The Basic Was Quoted Less Than My Offer Letter. Does This Affect.

Hi all,

I have been working in a company for the past year and recently received a raise. In my offer letter, the basic salary and HRA were high, but in my recent appraisal, they were quoted much lower. Does this have an impact?

Kindly provide your suggestions.

Thank you,
Kripa

Dear Friend,

Even though your appointment letter and other statutory deductions e.g., P.F., Service Tax calculation must be based on the old basic only.

For safety measures, please politely communicate with the HR Department in writing to address any mistakes and avoid future problems.

Regards,
Y.R. Shirke

Yes. It would impact your savings and taxes. Management may save employer's contribution in EPF. You will get better take home now.
It will also effect Gratuity, bonus, Leave encashment, EDLI insurance, etc.,
Section 12 in The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
12. 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.

Kripa has not mentioned whether there is an overall hike in gross salary or not. If yes, how and how much? As a result of the revision in salary, with or without a hike, there is a possibility of an upward revision in Basic and lowering the DA. This is normal when part of the existing DA is merged with basic pay, especially whenever a revision takes place linking the DA with CPI/WPI.

Lowering the Basic will surely reflect/impact increments, EPF, Gratuity, Bonus, and all other perks linked to basic pay. However, if there is an overall increase in the gross salary, it will not affect the take-home salary. In short, it's not a good practice to lower the basic/HRA of employees.

Please provide your previous salary structure, including deductions, and your current salary structure with deductions. Additionally, please include your designation and the type of industry you are employed in for feedback.

Employers cannot reduce basic salary as it impacts PF deductions and payment of gratuity. However, if you are prepared to fight on these grounds with your HR/employer, it will be restored. Nevertheless, an increase in salary does not matter in this case.