Can Basic Be Decresed ? Is It Legal ? - DOC Download

Dear Raj Kumar Ji,

With due respect to you, sir, I submit my views as follows:

Even in FTC, there should not be a reduction in emolument. Negotiations should be for a higher emolument.

I too have heard about the reduction in basic pay by way of PUNISHMENT by the Competent Authority in PSU and Government services. But in the private sector, there is no such reduction in basic pay by way of PUNISHMENT.

In the case of an FTC consultant, you can negotiate for lesser emolument. However, in the case of an FTC employee, you cannot.

I do not agree with you. According to my view, DA is a part of the salary. Salary means basic plus DA. We need not mention the DA separately. Therefore, we call it a basic consolidated component also. In one of the postings by B. Saikumar (who is one of the learned contributing members of this forum), it is rightly said by him that the DA is that part of the component of salary which is meant for neutralizing the erosion of basic wages by the cost of inflation.

Basic can be reduced by awarding punishment of withholding of increment in a disciplinary proceeding, not otherwise. It is possible not only in the public sector but also in the private sector if the standing orders provide for it.

VARGHESE MATHEW
09961266966

Dear Keshav,

Thanks for taking pains to clarify certain points to the maximum extent possible. I appreciate your inputs. All these discussions on the finer points will surely enrich our members. However, having gone to the farthest point; let us now come to the original query and restrict ourselves within its purview. Here, the member is talking about a systemic, unilateral reduction in salary across the organization, and I think this point has now been more than adequately covered.

Hope you agree on this.

Warm regards.

Dear Soma,

As "Basic Pay" and Gross (Total Salary or total emoluments), CTC are two different terms, you should clarify these in your query to have a clear understanding. In any case, there cannot be any reduction in the present Gross (Salary). However, restructuring the Basic & DA and other allowances without an overall reduction in gross is possible.

Kumar.S.

What I mentioned is that a workman can be awarded the punishment of withholding increments or reduction to a lower scale. In both cases, the basic salary is reduced.

VARGHESE MATHEW

Dear Varghese ji,

I have not differed with you. I again repeat, in PSU/Govt. Sector I have seen the reduction in wages/basic wages but not in the private sector. If you know of any such case in the private sector, I request you to share it with me. Based on my understanding and knowledge, in the private sector, there is no permission to reduce the wages/basic wages. Certified SOs cannot have such a provision unless someone takes advantage of Sr.11 in the schedule of the SO Act which states: "any other matter which may be prescribed".

According to the SO Act, punishment may be: i. warning/censuring; ii. fine in accordance with the provisions of the POW Act; iii. suspension for not more than 4 days; or iv. dismissal.

Please consider this as a sharing of knowledge. If I am wrong, feel free to correct me.

Dear All my seniors,

I am extremely thankful to you all for sharing your knowledge and enriching me. I genuinely appreciate your kind efforts to clarify my doubts. However, I will seek a little further guidance from your end.

First, let me clarify the exact condition in my organization. In the Standing Orders of my company, it is mentioned that the salary structure is subject to revision every 5 years. The same point is included in the appointment letters of all the employees, both regular and on FTC. As per the existing salary structure, the range of basic was fixed for each of the grades with other components of the gross salary being adjusted accordingly. Now, the management wishes to revise the structure, due to revision in the coming FY, and fix the range of the gross for each grade instead of the basic. The basic and other components will be decided as certain percentages of the gross. In doing so, the existing gross will not decrease. Though the majority of people will not suffer, there will be a few instances where the basic salary, if calculated as a % of the gross, will become less than the existing basic as per the present structure. This is happening in both the regular & FTC cases.

For example, presently Mr. X gets a gross salary of Rs.5000/- where the basic is Rs.3000/- and other allowances are Rs.2000/-. Now, in the revised structure, the gross range for his grade has been fixed at 5,000/- to 10,000/- and basic will be calculated at 30% of the gross. If Mr. X gets an increment of Rs.1000/-, then his gross becomes Rs.6000/- and the basic will become 1800/-, which is less than Rs. 3000/-.

Now, if the basic cannot be decreased, then how can the balance Rs.1200/- be adjusted? You are kindly requested to suggest any remedial action for such cases only. Please be informed that the company is not going to reduce the salaries in general but wants to implement the revised structure in the annual appraisal.

With regards,

Soma.

Dear Soma,

This is exactly what I was predicting. However, normally the structure is made first with the Basic and then other allowances as a percentage on the basic. For example, DA could be 30% of basic, HRA 20% of basic, City allowance 10% of basic, Conveyance 10% of basic, and so on. Your firm, on the other hand, is trying the other way around, putting the cart behind the horse. Generally, this pattern is followed in the government and government-controlled PSUs, autonomous establishments, educational institutions, etc., where government guidelines are adopted in the matter of pay fixation and allowances. Even in the private sector, modern establishments follow the concept of CTC these days. Nevertheless, your attempted restructure should not cause any problems for EPF, ESI, Pension, Gratuity, etc., as these are not calculated on the basic pay but on the salary, where the gross includes basic pay + other defined allowances regardless of their names. So, there cannot be any ambiguity except that there could be some embarrassment among those whose basic pay is revised downwards as it may seem they have been downgraded by the hidden effect. By the way, what pattern of DA are you going to follow, is it based on government-declared CPI/WPI-based indices or something else? I think your firm could have applied their mind to breaking down 'other allowances' as well, as it would be necessary for statutory compliance purposes.

Regards,
Kumar S.

Dear Sir (Mr. Kumar S.),

Thank you so much for your kind response. Requesting you to kindly suggest a suitable way of calculating the salary where we can have a pre-decided gross and the components as a percentage break-up without violating the statutory requirements. We do have the government CPIs, but would like to understand how to calculate the DA based on the same. Please help me.

Regards,
Soma.