Dear Sir,
I have a query regarding the HR department: suppose in the laborers' salaries, the following accounts were included: basic, HRA, education special allowance, and allowance (DA), and at that time, HRA was given at 15%. However, through some internal policy, the management has merged the education allowance into basic and special allowance, and reduced the HRA to 5%. Could there be any issues with this, considering that the workers have benefited in PF due to the increase in basic?
Secondly, the laborers have complained to the labor office about the merging of allowances. The labor officer believes that this should not have been done.
(1) Did the management do the right thing or wrong thing?
(2) If it was wrong, in which act does it say that merging cannot be done?
(3) And if merging is not allowed, in which act is it stated that merging cannot be done?
Please give me suggestions.
Sanjay
From India
I have a query regarding the HR department: suppose in the laborers' salaries, the following accounts were included: basic, HRA, education special allowance, and allowance (DA), and at that time, HRA was given at 15%. However, through some internal policy, the management has merged the education allowance into basic and special allowance, and reduced the HRA to 5%. Could there be any issues with this, considering that the workers have benefited in PF due to the increase in basic?
Secondly, the laborers have complained to the labor office about the merging of allowances. The labor officer believes that this should not have been done.
(1) Did the management do the right thing or wrong thing?
(2) If it was wrong, in which act does it say that merging cannot be done?
(3) And if merging is not allowed, in which act is it stated that merging cannot be done?
Please give me suggestions.
Sanjay
From India
Normally merging allowances to basic salary should be welcomed by the employees and their Unions because it is on the basic wages that the retirements benefits like gratuity are calculated. When the companies are trying to increase the HRA and reduce the basic pay, the policy of your company is a positive employee welfare activity. However, legally, whenever such changes are made, the employer is expected to issue a formal notice u/s 9A of the Industrial Disputes Act. This is because the salary structure being one of the conditions of service, when it is changed a 21 days notice is required to be given to the employees. Otherwise, there is no illegality especially when there is no reduction in the take home or contributions payable by the employer towards bonus, PF, gratuity etc.
From India, Kannur
4239From India, Kannur
In this case the take home might have reduced, as allowances were merged with Basic Salary, resulting in the workers' contribution to PF also increasing. The take home of the workers should have been protected.
From India, Kolkata
From India, Kolkata
Sir,
What I understand, I have calculated salary of laborers before merger and after merger.
Before Merger:-
Basic Pay:- Rs 100 PF :- Rs 8.33
Education special allowance (5%) :- Rs 5
HRA (15%) :- Rs 15
DA (50%) :- 50
------------------ -----------------
gross salary Rs 170.00 Deductions Rs 8.33 Net Salary :- Rs 161.67
----------------- ----------------
After Merger:-
Basic Pay :- Rs 105 PF:- Rs 8.75
HRA (5%) :- Rs 5.25
DA(50%) :- Rs 52.50
------------------ ----------------------
Gross Salary Rs 162.75 Deductions Rs 8.75 Net Salary :- Rs 154
-------------------- ----------------------
is there any mistake ? After Merger Take home salary is less then before merger. For calculation I assumed 5% percentage education allowance and DA 50% .
From India, Indore
What I understand, I have calculated salary of laborers before merger and after merger.
Before Merger:-
Basic Pay:- Rs 100 PF :- Rs 8.33
Education special allowance (5%) :- Rs 5
HRA (15%) :- Rs 15
DA (50%) :- 50
------------------ -----------------
gross salary Rs 170.00 Deductions Rs 8.33 Net Salary :- Rs 161.67
----------------- ----------------
After Merger:-
Basic Pay :- Rs 105 PF:- Rs 8.75
HRA (5%) :- Rs 5.25
DA(50%) :- Rs 52.50
------------------ ----------------------
Gross Salary Rs 162.75 Deductions Rs 8.75 Net Salary :- Rs 154
-------------------- ----------------------
is there any mistake ? After Merger Take home salary is less then before merger. For calculation I assumed 5% percentage education allowance and DA 50% .
From India, Indore
With this merget the gross salary is reducing, and that is not permissible. I have already said that there is no illegality so loga as the salary does not reduce. But in this case, though the basic pay increases, the Gross salary comes down because of drastic reduction in the HRA. HRA was 15% which is made 5%. That should be retained. How is it possible for an employee who is paying 15% of hs wages as HRA to get an accommodation at 5% rent? No, that is not possible. You can increase the basic salary, and that is welcomed. But at the same time, you should either increase the Gross salary or maintain the gross salary. Even if the gross salary is maintained (it can be maintained by putting the same HRA and dearness allowance not as a percentage but amount), there will be a reduction in the take home salary, but that is not an issue because along with their contribution to PF, the employer will also make an increased contribution to PF and ultimately, it will only gain them.
Let me ask another question. Why is DA and Education and Special allowance not considered for deduction and contribution of PF? If Education and special allowance is not paid to all the employees, then it can be excluded for PF, but you cannot exclude the DA from PF contributing salary.
From India, Kannur
Let me ask another question. Why is DA and Education and Special allowance not considered for deduction and contribution of PF? If Education and special allowance is not paid to all the employees, then it can be excluded for PF, but you cannot exclude the DA from PF contributing salary.
From India, Kannur
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Salary-Note.doc
SALARY SHEET CALCULATION.xls