Reduction in Basic salary due to shifting from one State to other State

Office Relocation and Salary Adjustment

A company has shifted its office from Delhi to Noida. In Delhi, minimum wages are higher compared to Noida. Can the company reduce the basic salary component in the salary as per Noida (UP) minimum wages, even though the overall salary will remain the same?

Thanks in advance.

Dear Rekha,

When the appropriate government under the Minimum Wages Act, 1948, which fixes the minimum wages is a state government for any employment, it is bound to vary from the rates of other states. Therefore, when an industry shifts its location to another state where the rates of minimum wages are comparatively less or transfers some of its employees to such a state, it cannot unilaterally reduce the existing higher rates of wages to match the lower rates fixed by the latter state without the consent of the employees concerned under a bilateral settlement or without issuing a 21-day notice under Section 9-A of the Industrial Disputes Act, 1947.

Though the overall or gross salary remains the same, certainly when the basic is less, it will have a cyclical impact on indirect benefits like bonus, gratuity, contribution to EPF, etc.

It will be in the interest of smoother relations with the employees to protect the present wages (as per Delhi's notified rate) until the minimum wages declared in the new state (UP) exceed it.

EPF salary on which contributions are made can't be reduced.