Hello,
Reducing the salary affects all the major laws. It is money issue and most sensitive.
The immediate affected Acts are Payment of Wages, EPF,ESIC, Gratuity etc.
There may be more depending on state to state.
Is there recognized union in the establishment then matter becomes little bit easier. You need to do agreement with the Union. Maharashtra has MRTU/PULP Act.
If the wages are reduced unilaterally or even if one employee complains then it would land up under PULP Act schedule 4 ( 9) of the Act.
The employees can also take recourse to payment of wages Act.
After reducing the wages it should not be below minimum wages act for that particular schedule of employment. There can be no escape from this provision.
Since you want a legal procedure for it then you should always have ALC or Labour Officer as concillator for this agreement. And register it as settlement.
( My terminology may be incorrect here)
You can mention in the fresh agreement with objective criteria for increasing the wages and conditions for increment as defence in case it lands up in courts.
If company is paying PF and ESIC at nominal rate then its fine. If company is paying more contribution than statutory. Then you have added to the problem
Section 12 of the EPF ACT
"12. Employer not to reduce wages, etc. - No employer in relation to [an establishment] to which any [Scheme or the Insurance Scheme] applies shall, by reason only of his liability for the payment of any contribution to [the Fund or the Insurance Fund] or any charges under this Act or the [Scheme or the Insurance Scheme], reduce, whether directly or indirectly, the wages of any employee to whom the [Scheme or the Insurance Scheme] applies or the total quantum of benefits in the nature of old age pension, gratuity [provident fund or life insurance] to which the employee is entitled under the terms of his employment, express or implied.]"
So no employer shall by reason of his inability for payment of the contribution to the Provident Fund reduce the wages of any employee to which such Scheme apply either directly or indirectly.
The courts take very strong view if any beneficial legislation is tinkered which will also affect old age benefits.
I am just focusing on the word ‘only’ in the sentence Employer not to reduce wages, etc. - No employer in relation to [an establishment] to which any [Scheme or the Insurance Scheme] applies shall, by reason only of his liability for the payment of any contribution.
In this case you are not reducing the wages just to reduce liability of PF. But you are reducing to save jobs of the employees. You can argue on this point. But I am yet to come across such fine distinction in court cases.
I am sure many learned members can throw light from their vast experience.
I would still suggest that you reduce the other allowances and perks without reducing the statutory contribution. It would be the Best solution.
In case you need to reduce the PF, ESIC contribution then it would be big obstacle but if you are willing to fight then be prepared with lot of documentation like Balance sheet, Income statement and fresh agreement with Staff. Alongwith the section 12 of EPF ACT judgements.
PF officials and others will definitely go-to court over this reduction. And I doubt ALC would be willing to sign such agreement even if it's mutual.
Even if one staff member goes to Court under Industrial disputes or payment of wages Act then it would be a big job for you.
You can go through Marathwada Gramin Bank Karamchari Sanghatana and Another -vs- Management of Marathwada Gramin Bank if it helps.
In addition check for more cases with Gratuity, Payment of Wages points for reduction in Salary. I have tried to give a direction to genuine problem. And it should be taken as last option.
This is applicable to service industry salaries. They form largest part of expense whereas manufacturing industries the salary and wages form miniscule part. And even with this exercise you aren’t going to save much.
From India, Mumbai
13Reducing the salary affects all the major laws. It is money issue and most sensitive.
The immediate affected Acts are Payment of Wages, EPF,ESIC, Gratuity etc.
There may be more depending on state to state.
Is there recognized union in the establishment then matter becomes little bit easier. You need to do agreement with the Union. Maharashtra has MRTU/PULP Act.
If the wages are reduced unilaterally or even if one employee complains then it would land up under PULP Act schedule 4 ( 9) of the Act.
The employees can also take recourse to payment of wages Act.
After reducing the wages it should not be below minimum wages act for that particular schedule of employment. There can be no escape from this provision.
Since you want a legal procedure for it then you should always have ALC or Labour Officer as concillator for this agreement. And register it as settlement.
( My terminology may be incorrect here)
You can mention in the fresh agreement with objective criteria for increasing the wages and conditions for increment as defence in case it lands up in courts.
If company is paying PF and ESIC at nominal rate then its fine. If company is paying more contribution than statutory. Then you have added to the problem
Section 12 of the EPF ACT
"12. Employer not to reduce wages, etc. - No employer in relation to [an establishment] to which any [Scheme or the Insurance Scheme] applies shall, by reason only of his liability for the payment of any contribution to [the Fund or the Insurance Fund] or any charges under this Act or the [Scheme or the Insurance Scheme], reduce, whether directly or indirectly, the wages of any employee to whom the [Scheme or the Insurance Scheme] applies or the total quantum of benefits in the nature of old age pension, gratuity [provident fund or life insurance] to which the employee is entitled under the terms of his employment, express or implied.]"
So no employer shall by reason of his inability for payment of the contribution to the Provident Fund reduce the wages of any employee to which such Scheme apply either directly or indirectly.
The courts take very strong view if any beneficial legislation is tinkered which will also affect old age benefits.
I am just focusing on the word ‘only’ in the sentence Employer not to reduce wages, etc. - No employer in relation to [an establishment] to which any [Scheme or the Insurance Scheme] applies shall, by reason only of his liability for the payment of any contribution.
In this case you are not reducing the wages just to reduce liability of PF. But you are reducing to save jobs of the employees. You can argue on this point. But I am yet to come across such fine distinction in court cases.
I am sure many learned members can throw light from their vast experience.
I would still suggest that you reduce the other allowances and perks without reducing the statutory contribution. It would be the Best solution.
In case you need to reduce the PF, ESIC contribution then it would be big obstacle but if you are willing to fight then be prepared with lot of documentation like Balance sheet, Income statement and fresh agreement with Staff. Alongwith the section 12 of EPF ACT judgements.
PF officials and others will definitely go-to court over this reduction. And I doubt ALC would be willing to sign such agreement even if it's mutual.
Even if one staff member goes to Court under Industrial disputes or payment of wages Act then it would be a big job for you.
You can go through Marathwada Gramin Bank Karamchari Sanghatana and Another -vs- Management of Marathwada Gramin Bank if it helps.
In addition check for more cases with Gratuity, Payment of Wages points for reduction in Salary. I have tried to give a direction to genuine problem. And it should be taken as last option.
This is applicable to service industry salaries. They form largest part of expense whereas manufacturing industries the salary and wages form miniscule part. And even with this exercise you aren’t going to save much.
From India, Mumbai
Dear Friend...
You can reduce other components except Basic & DA as you provided in the letter.... But the intimation should be displayed at notice board before the couple of the months..
That will be healthy environment for Company / Employee Side for future arguments...
From India, Bangalore
You can reduce other components except Basic & DA as you provided in the letter.... But the intimation should be displayed at notice board before the couple of the months..
That will be healthy environment for Company / Employee Side for future arguments...
From India, Bangalore
Pay-cut and Job-cut are the two possible options before an employer when his industry struggles to survive in a consistently persisting business recession. These are the painful but inevitable survival measures in the life of any business entity when things go beyond the control of the employer. When the employer has no reserves or other sources to augment the funds for down-sizing the no of employees by means of statutory retrenchment or under any scheme of voluntary separation, pay-cut becomes the preferable evil to job-cut. Of course, the question of legality of such a move can not be simply brushed aside by the employer. When the measure of down-sizing is not possible, reducing the salary would be handy if there is consensus between the employer and the employees subject to the condition that it does not result in contracting-out prohibited expressly u/s 25 of the Minimum Wages Act,1948. Therefore reduction in wages would not be illegal if it is in conformity with the provisions of section 9-A of the Industrial Disputes Act,1947 in respect of the employees falling within the definition of the term "workman" or if it is carried out by modification of the existing contract of employment by mutual consent in respect of other employees.
From India, Salem
From India, Salem
The notice should be placed 21 days at the prominent place as per industrial disputes act 9(A). It is not months.
My focus was on giving the answer in positive that it is possible to reduce the wages legally.
Air India has reduced the wages of staff. But they failed to give notice under section 9(A). It was industrial disputes.
Even for individual workmen the salary can be reduced as per the place of work.
Person working in city areas get higher salary than if he had been working in the rural area.
From India, Mumbai
My focus was on giving the answer in positive that it is possible to reduce the wages legally.
Air India has reduced the wages of staff. But they failed to give notice under section 9(A). It was industrial disputes.
Even for individual workmen the salary can be reduced as per the place of work.
Person working in city areas get higher salary than if he had been working in the rural area.
From India, Mumbai
Dear Friends,
It all depend on your salary structure/ components and terms and conditions of your employment. Now flexible salary has become the new trend in corporate and directly connected to individual performance and organisational performance.
For further detail pl send complete detail of your facts.
Regards,
V K Sharma
From India, Delhi
It all depend on your salary structure/ components and terms and conditions of your employment. Now flexible salary has become the new trend in corporate and directly connected to individual performance and organisational performance.
For further detail pl send complete detail of your facts.
Regards,
V K Sharma
From India, Delhi
Flexible pay structure can't overrule Minimum wages Act, payment of wages Act,PF,ESIC etc. Change in service conditions cannot be done unilaterally. The designation as Manager, Supervisor doesn't matter under law unless work is of such nature.
The reduction should be within law.
From India, Mumbai
The reduction should be within law.
From India, Mumbai
Hi
As pee my knowledge we can no pay less than the minimum wages of the particular state, but I would like to share two things as a solution.
1, You can take employee in confidence and show their salary structure as an part timer on paper where salary will reduce as per 4 hours and rest of the amount can adjust under OT.
2. Secondly you can shift there payroll on professional by deducting TDS , in such case no minimum wages act will be apply.
From India, Mumbai
As pee my knowledge we can no pay less than the minimum wages of the particular state, but I would like to share two things as a solution.
1, You can take employee in confidence and show their salary structure as an part timer on paper where salary will reduce as per 4 hours and rest of the amount can adjust under OT.
2. Secondly you can shift there payroll on professional by deducting TDS , in such case no minimum wages act will be apply.
From India, Mumbai
Salary once incremented can’t be reduced its an legal offence. Thanks & Regards, From, Sumit Kumar Saxena
From India, Ghaziabad
From India, Ghaziabad
Dear All,
Let us give more information while answering.
If it is offence then let us give some link,judgement, reference.
It is not offence but it has to be done within legal limits as answered earlier.
The person who asked query has not responded.
So no point in further discussion.
From India, Mumbai
Let us give more information while answering.
If it is offence then let us give some link,judgement, reference.
It is not offence but it has to be done within legal limits as answered earlier.
The person who asked query has not responded.
So no point in further discussion.
From India, Mumbai
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Salary-Note.doc
SALARY SHEET CALCULATION.xls