Facing Pension Issues Due to Pay Reduction Punishment: Is the Company Right or Wrong?

Sirs, One person undergoing punishment of "Reduction of pay to the minimum of basic pay for a period of 2 years without cumulative effect." Now, before the end of three months of the punishment, the organization implemented a special VRS scheme to reduce manpower, for which this employee also applied. The organization granted the Special VRS scheme three months prior to this punishment period, duly recovered the emoluments amount of the balance punishment period for those 3 months. In the office order, they stated that there are no punishments pending.

However, when calculating the pension, his pay was not restored. They calculated the pension with the punished (lower pay) rate, resulting in a significant variation in pension benefits. This employee faced two types of punishments: lower pay and the recovery of the amount for the balance punishment period. Since the punishment was a temporary measure, and the amount towards the balance punishment was recovered, why wasn't the original pay restored as they claimed there were no pending punishments? Who is correct in this situation? Are there any orders or judgments available to support the restoration of pay? If so, could you please provide a link?

Thank you all.

Understanding the Impact of Temporary Pay Reduction

Lowering or reducing pay without cumulative effect usually means a temporary reduction in basic wages. If this reduction is implemented for two years, then after the two-year period, the employee will start receiving their actual salary with increments for the two-year duration. However, different interpretations may arise depending on the wording used in the policy or disciplinary action.

During these two years, if an employee reaches superannuation, the pension would be based on the actual basic pay only. Similarly, if an employee resigns or opts for VRS while under the disciplinary period, their wages at the time of resignation or VRS will serve as the basis for calculating retirement benefits. The question arises as to why the employer would need to recover the amount related to the balance of the punishment period.

Adjusting Salary After Disciplinary Action

If the intention is to adjust the salary, then the employee should be placed in the pay scale just before the disciplinary action and receive two increments lost during the penalty period. Retirement benefits should then be calculated based on this new adjusted pay.