Query Regarding Salary Structure

Dear Seniors,

I am working in a Granite export factory in Bellary. Can we change the salary structure by either reducing basic + DA or without altering basic + DA, which has been practiced for the last 10 years? Your advice and suggestions are appreciated.

Thanks

You can change the salary structure. Please keep in mind, if the Basic + DA is lower than the current rate, employees may object, which could work against you (especially in potential legal proceedings). It's essential to obtain written consent from employees before making any changes.

Thank you, Mr. Prashant, for your suggestion. My problem is my employer is facing a big issue when it comes to paying gratuity because the previous non-professional staff in the HR department has shown the total pay as basic + DA. Now, it will be a significant issue for the employer to pay the gratuity amount on the higher side. For example, one of our skilled employees has a Basic of 7000, DA of 3500, and a total pay of only 10500. The employer is paying PF contribution for the ceiling amount of Rs 780 (12% for 6500). Can we reduce the Basic and DA to 6500 and show the other 4000 in other heads? Please reply to me, sir.

With regards,
Shanmukha

All emoluments as per the terms of employment and conditions of service, whatever their names may be, including DA, will be treated as wages for Gratuity. All other allowances, bonus, commission, HRA, OT, will be excluded.

You can restructure your wages without resulting in a reduction in contributions to PF, ESI, etc.

Varghese Mthew

Dear Alle,

You changed the total salary structure, but the Basic + DA should remain the same or increase; you can't decrease it. That goes against labor laws. You can adjust the gross salary in other components like HRA, Mediclaim, Transport allowance, Washing allowance, Children allowance, uniform allowance, and other allowances. Your Basic + DA should be more than or equal to the minimum wage of that state.

For example, you can deduct allowances and adjust them to basic + DA so that you can fulfill the minimum wage criteria.

Do you have a union there? If yes, have you entered into a settlement with them? If yes, then it may be very difficult to reduce the PF-able salary, i.e., Basic + DA. Further, is the DA fixed or variable?

If you don't have a union settlement in place, then the PF-able salary can be reduced by keeping the total emoluments the same, with the written consent of employees, by keeping the Basic + DA to Rs. 6,500/-. There is a Supreme Court decision to that effect, as anyway PF is mandatory till Rs. 6,500/- only.

Dear Mr. Dixon,

In the case of PF, once it is deducted on an amount more than Rs 6500.00, then it is not permitted to reduce to the extent of Rs. 6500.00 unless with the consent of all affecting employees and Concerned PF authorities.

My dear Shanmukha,

It's a case of management becoming wise and trying to reduce its statutory liabilities, resulting in a loss for the employees. We come across such cases every day. Do go through and consider the responses given earlier. It would not be proper to reduce the Basic pay and DA of employees. What can be done without harming much the interest of employees is to accordingly structure the salaries in case of the next increment and promotions after the performance appraisals, without reducing the existing basic pay and DA. Convince your management to wait and act accordingly so as not to demotivate employees.

Warm regards.

Dear Prashanth and Dear Dixon sir,

Many thanks for your prompt response. Here, we do not have any union in our company. We are following the minimum wage rule insisted by the Government of Karnataka. We come under the natural stone granite industry.

We are deducting Rs 780/- only towards PF for the employees whose PFable salary is even more than Rs 6500/-, and DA is variable in our company. Now, my doubt is, can we reduce the basic + DA up to Rs 6500/- without disturbing their PF contribution and total net pay? Please advise me in this regard.

Thanking you,
Shanmukhappa Alle

Dear Alle.shanmukha,

Are you waiting for a response that suits you and supports your company's intentions? No approval is required for doing anything that is unfair. You have made your intentions very clear.

The earlier HR has rightly included Basic pay and D.A. in the calculation of gratuity. But you are calling it unprofessional! You want to please your employers by circumventing or breaking the law. For this, you need support from CiteHR members! I must tell you that this forum does not support unethical actions, nor does it advise or support such practices. I shall be constrained to delete/remove any such contents.

Have a nice day.