Can a Long-Standing Public Company Legally Alter Salary Structure to Cut PF and Gratuity Costs?

Salary Structure and Legal Considerations

One public limited company, operating for the last 25 years, has a salary structure comprising 95% basic of gross salary, 2.5% HRA, and 2.5% CCA of gross salary. However, due to the high basic salary, the company bears more liability, such as PF and gratuity. Is it permissible by law for the company to change its salary structure to reduce liability?

At the same time, employees of the company may also suffer a loss of PF contributions and receive a lower gratuity amount at the time of retirement. Can this type of practice be challenged in court?

Section 12 of the EPF Act

Section 12 in The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 states:

1. [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.

If you are a worker, go to the labor commissioner with the complaint. If you are not a worker, the only remedy here could be civil litigation.