Dear All, Namaste! Currently, the employer has one salary structure, and now they want to change the salary structure of all employees without any changes in PF contribution (which means we have a ceiling of 15,000 PF contribution). For example, if an employee has 60,000 Basic + DA and other allowances, the gross amount is 60,000, totaling 1,20,000. The monthly contribution for PF is fixed at 1,800/-. If we make any changes in Basic from 60,000 to 30,000, will any issues arise or any legal problems occur? Please let us know.
Regards, Raghu.
From India, Bagalkot
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Regards, Raghu.
From India, Bagalkot
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Employers have every right to restructure the salaries of their employees. However, in the case of PF-covered employees, the employer cannot reduce the PF salary with the objective of lowering their liabilities. This is clearly explained in Section 12 of the Employees Provident Fund & Miscellaneous Provisions Act, 1952.
In the cited case, it does not matter if you reduce the basic salary, as the PF salary ceiling is Rs. 15,000 and the monthly contribution is Rs. 1,800.
From India, Aizawl
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651In the cited case, it does not matter if you reduce the basic salary, as the PF salary ceiling is Rs. 15,000 and the monthly contribution is Rs. 1,800.
From India, Aizawl
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Dear Raghu,
I am of the opinion that the right of the employer to restructure the salary of their employees is not unrestricted. Such restrictions can either be statutory or ethical, depending on the capacity of their employment position, especially if the restructuring is likely to be disadvantageous to the employees concerned.
For instance, we can find restrictions on the reduction of the basic salary to the disadvantage of the employee under the Industrial Disputes Act, 1947, and the EPF Act, 1952.
Determining Parity Between Industry Wages and Statutory Minimum Wages
Though the method to determine the parity between industry wages and the statutory minimum wages with reference to the components of wages falling within the ambit of the definition of the term 'wages' under the Minimum Wages Act, 1948, stands finalized by the Apex Court in the Airfreight Corporation case, the negative impact of the sum of such reduced basic and the dearness allowance for the purpose of computation of statutory gratuity was not brought to the notice of the Court. Undoubtedly, such a dispute, if raised, can be a valid one.
Proportionality Criterion Under the Code on Wages, 2019
This apart, the proportionality criterion between the sum of basic, dearness allowance, and/or retaining allowance and all other allowances in the wage/salary structure introduced into the definition clause of wages under the Code on Wages, 2019, would be an insurmountable barrier in this regard when the said Code comes into force.
Therefore, an employer should take into account the overall statutory impact of such restructuring.
From India, Salem
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I am of the opinion that the right of the employer to restructure the salary of their employees is not unrestricted. Such restrictions can either be statutory or ethical, depending on the capacity of their employment position, especially if the restructuring is likely to be disadvantageous to the employees concerned.
For instance, we can find restrictions on the reduction of the basic salary to the disadvantage of the employee under the Industrial Disputes Act, 1947, and the EPF Act, 1952.
Determining Parity Between Industry Wages and Statutory Minimum Wages
Though the method to determine the parity between industry wages and the statutory minimum wages with reference to the components of wages falling within the ambit of the definition of the term 'wages' under the Minimum Wages Act, 1948, stands finalized by the Apex Court in the Airfreight Corporation case, the negative impact of the sum of such reduced basic and the dearness allowance for the purpose of computation of statutory gratuity was not brought to the notice of the Court. Undoubtedly, such a dispute, if raised, can be a valid one.
Proportionality Criterion Under the Code on Wages, 2019
This apart, the proportionality criterion between the sum of basic, dearness allowance, and/or retaining allowance and all other allowances in the wage/salary structure introduced into the definition clause of wages under the Code on Wages, 2019, would be an insurmountable barrier in this regard when the said Code comes into force.
Therefore, an employer should take into account the overall statutory impact of such restructuring.
From India, Salem
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Though the employer has the right to restructure the remuneration structure, in this case, the employee will receive almost 50% less gratuity. If an employee resigns, dies, or retires and brings it to the attention of the controlling authority under the PG Act, it may create a dispute in the future by depriving the employee of a fair gratuity payment.
Moreover, at a monthly gross of 1,20,000/-, if the Basic & DA is 30,000/-, then it is 25% of the monthly gross, which does not align well with the definition of Wages under the new labor codes.
S K Bandyopadhyay (WB, Howrah)
CEO-USD HR Solutions
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USD HR Solutions – To Strive towards excellence with effort and integrity.
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From India, New Delhi
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Moreover, at a monthly gross of 1,20,000/-, if the Basic & DA is 30,000/-, then it is 25% of the monthly gross, which does not align well with the definition of Wages under the new labor codes.
S K Bandyopadhyay (WB, Howrah)
CEO-USD HR Solutions
[Phone Number Removed For Privacy-Reasons]
[Email Removed For Privacy Reasons]
USD HR Solutions – To Strive towards excellence with effort and integrity.
http://www.usdhrs.in
From India, New Delhi
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The wisdom of Section 12 of the EPF Act is restrictive and prohibitive in reducing wages directly or indirectly. If wages are reduced without the consent of the workmen, it would amount to wage theft, which can be recovered under Section 15 of the Payment of Wages Act by the Prescribed Authority of the State or under IDA Section 33.
From India, Mumbai
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From India, Mumbai
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