Hi Soma,
As far as I can see, there is no specific provision in the law that you cannot reduce the basic or even the total salary that you pay to an employee. Make sure that the basic + DA + Special Allowance is more than the minimum wages. The only other rule that applies is that the amount of PF cannot be reduced. However, even that rule applies only for the statutory limit of PF amounting to Rs. 780 per month. If your basic is above 6500 per month, then the reduction will not affect PF.
That said, there are other factors that apply.
If you reduce wages, it can result in an industrial dispute.
In your case, the agreement is being approved by the employees and the union, so that would not be a problem. In general, employees are more concerned about take-home pay rather than basic.
Sometimes people try to make trouble simply by taking advantage of a gap they perceive. So you may have an investigation by the authorities who will harass you on this matter. One way out is to get the approval of the concerned labor officer for your settlement.
From India, Mumbai
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2493As far as I can see, there is no specific provision in the law that you cannot reduce the basic or even the total salary that you pay to an employee. Make sure that the basic + DA + Special Allowance is more than the minimum wages. The only other rule that applies is that the amount of PF cannot be reduced. However, even that rule applies only for the statutory limit of PF amounting to Rs. 780 per month. If your basic is above 6500 per month, then the reduction will not affect PF.
That said, there are other factors that apply.
If you reduce wages, it can result in an industrial dispute.
In your case, the agreement is being approved by the employees and the union, so that would not be a problem. In general, employees are more concerned about take-home pay rather than basic.
Sometimes people try to make trouble simply by taking advantage of a gap they perceive. So you may have an investigation by the authorities who will harass you on this matter. One way out is to get the approval of the concerned labor officer for your settlement.
From India, Mumbai
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Dear Sir, Thank you very much for the kind explanation. Sir, may I request your kind-self to guide me on how to calculate DA from CPI. With regards, Soma.
From India, Kolkata
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From India, Kolkata
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Generally, the notification from the government will outline how much DA is to be given. In the case of minimum wages, the increase is specified. You can apply the same ratio of increase in DA for minimum wages to the wages you are paying.
DA increases are announced every 2-3 months by the government, separately for urban, rural, and industrial workers. The government also announces DA increases for central government employees. You can obtain this information from NIC and published reports in newspapers.
From India, Mumbai
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DA increases are announced every 2-3 months by the government, separately for urban, rural, and industrial workers. The government also announces DA increases for central government employees. You can obtain this information from NIC and published reports in newspapers.
From India, Mumbai
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Dear Soma,
I have attached a few notes on the history of DA, especially followed in the government sector, unionised industrial houses, etc., the recent salient features of WPI & CPI, and indices applicable for the present and notification together with the links which would help you to surf through relevant information and guidance. If you have to follow the government pattern of pay, scales of pay, FDA, VDA, and other allowances, you should buy a copy of "Swamy's Handbook 2013" from the book sellers where you'll get all information about pay, DA, allowances, tax matters, and so many other aspects of the law. If you have any specific queries, you may raise them here.
All the best.
Kumar S.
From India, Bangalore
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I have attached a few notes on the history of DA, especially followed in the government sector, unionised industrial houses, etc., the recent salient features of WPI & CPI, and indices applicable for the present and notification together with the links which would help you to surf through relevant information and guidance. If you have to follow the government pattern of pay, scales of pay, FDA, VDA, and other allowances, you should buy a copy of "Swamy's Handbook 2013" from the book sellers where you'll get all information about pay, DA, allowances, tax matters, and so many other aspects of the law. If you have any specific queries, you may raise them here.
All the best.
Kumar S.
From India, Bangalore
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Dear Sirs (Mr. Banerjee & Kumar S.),
Please accept my sincere thanks for the valuable guidance and inputs provided by you. This will definitely help me a lot to complete my assignment.
With regards,
Soma.
From India, Kolkata
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Please accept my sincere thanks for the valuable guidance and inputs provided by you. This will definitely help me a lot to complete my assignment.
With regards,
Soma.
From India, Kolkata
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I have checked the Minimum Wages and found that the basic + DA for most executive positions is over 7000, i.e., (Basic 5000/5500+ DA1576/1600). These rates were sourced from Maharashtra Minimum Wages Jan 2013-June 2013. Can an organization have a basic pay lower than the mentioned amount for such positions? I am still confused. Can any organization have basic pay at 1800/2000/3000, etc.? Would that not go against statutory compliance?
raga
From India, Mumbai
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raga
From India, Mumbai
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This matter is being debated in court at the moment. However, according to me, where the notification clearly lays down how much the minimum wages are in terms of basic and DA, you have no justification really in having it lower.
From India, Mumbai
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From India, Mumbai
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Dear all,
Reducing the basic salary/wage of an individual to whom the Industrial Disputes Act applies, whether it affects his gross salary/wage or not, will amount to a change in the conditions of his service and will constitute a violation of Section 9A of the Industrial Disputes Act.
With regards,
From India, Madras
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Reducing the basic salary/wage of an individual to whom the Industrial Disputes Act applies, whether it affects his gross salary/wage or not, will amount to a change in the conditions of his service and will constitute a violation of Section 9A of the Industrial Disputes Act.
With regards,
From India, Madras
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Does that hold true where the workers are agreeing to the restructuring ? This is (from what the post says), not an unilateral action
From India, Mumbai
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From India, Mumbai
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Dear friend,
There are no rules or guidelines legally prescribing how much the basic pay should be, as well as the amount of DA and other allowances. The minimum wages under the act represent the total emoluments, i.e., the gross salary or wages. This means that the Minimum Wages Act does not specify the breakdown of basic pay, DA, and other allowances. There is no restriction stating that the basic pay should exceed the DA or vice versa. In fact, many organizations, banks, etc., have their DA and allowances exceeding the basic pay.
There have been instances where DA is reduced in cases of "reverse inflation," but it is rare for basic pay to be decreased, typically reserved for disciplinary action. In certain cases, individuals found guilty may be demoted to a lower pay scale rather than being dismissed, as a lenient measure to retain them in employment. In situations where a firm is deemed a "sick industry" and faces closure, employees may volunteer to lower their salaries to protect their jobs and the industry's survival, showing their commitment to their livelihoods and the revival of the struggling business.
Many employers opt to merge a portion of the DA with the basic pay, allowing for DA to be recalculated after the merger, facilitating periodic wage revisions through agreements with employees' unions. However, raising the basic pay carries implications, as most DA and allowances are based on a certain percentage of the basic pay, leading to an overall increase in the employers' wage bill. On the other hand, reducing the basic pay is an infrequent occurrence, reserved for exceptional circumstances.
Kind regards,
Kumar S.
From India, Bangalore
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There are no rules or guidelines legally prescribing how much the basic pay should be, as well as the amount of DA and other allowances. The minimum wages under the act represent the total emoluments, i.e., the gross salary or wages. This means that the Minimum Wages Act does not specify the breakdown of basic pay, DA, and other allowances. There is no restriction stating that the basic pay should exceed the DA or vice versa. In fact, many organizations, banks, etc., have their DA and allowances exceeding the basic pay.
There have been instances where DA is reduced in cases of "reverse inflation," but it is rare for basic pay to be decreased, typically reserved for disciplinary action. In certain cases, individuals found guilty may be demoted to a lower pay scale rather than being dismissed, as a lenient measure to retain them in employment. In situations where a firm is deemed a "sick industry" and faces closure, employees may volunteer to lower their salaries to protect their jobs and the industry's survival, showing their commitment to their livelihoods and the revival of the struggling business.
Many employers opt to merge a portion of the DA with the basic pay, allowing for DA to be recalculated after the merger, facilitating periodic wage revisions through agreements with employees' unions. However, raising the basic pay carries implications, as most DA and allowances are based on a certain percentage of the basic pay, leading to an overall increase in the employers' wage bill. On the other hand, reducing the basic pay is an infrequent occurrence, reserved for exceptional circumstances.
Kind regards,
Kumar S.
From India, Bangalore
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Revision in Basic wage wef Mar 2014 Gazette.pdf