Increment to employees - the basic pay components are decreased when compared to the existing

Hi, We have prepared an increment for all our employees by utilizing one consultant. During observation of the report, it is noted that for some of the employees, the basic pay components are decreased when compared to the existing, whereas the increment % is adjusted in Other allowance. Overall , that employee may get the increment , but the basic pay is less than the existing basic pay.

Pls guide us whether we can consider this increment sheet

In a pay structure where the Basic salary qualifies for various statutory contributions like bonus, gratuity etc, reducing the same is just unfair. If you have been contributing your PF on basic salary alone, then the EPF officer will not allow such downward revision also. In future when you calculate the gratuity the employee can very well challenge that it is the total salary which will qualify for gratuity because thee basic salary is just a component of salary for the convenience of the employer and over the years there have been decrease in it without letting me know the reason for that. Therefore, never reduce the basic salary unless there is special intension to reduce it by way of punishment following a disciplinary enquiry against the employee.

Hi,

Reducing Basic salary will result in reduced PF contribution which is not right. For the employee there will be a hike in Take Home but if it affects PF contribution then it will not be legal. However if PF wages is well above 15000/- and if both employer and employee want to restrict PF contribution for 15k then it is allowed.

If you are reducing Basic pay which may result in reduced PF contribution, your company will end up into problem. It is statutorily incorrect, if you are reducing basic pay. (Please refer to Section -12 of Employees Provident Fund & Misc.Provisions Act,1952).

It should be the other way round, that is, after awarding increment, basic pay shall stand higher.

Please look into this and if required, do a sweeping overhaul of your existing pay structure and increment system.

Sir

Thanks for your response

As far as the CTC is taken care of ( increased ) with the increment, there is no problem of considering the Consultant's statement. Most of the Companies work on the CTC than the monthly components.