Restructuring of Salary

I am afraid, you cannot touch basic pay and reduce PF.

Daer Valsan,

Hi, I am Sahendra

The reduction of basic pay is not advisable for the employees, because the growth of salary of  the employees depend on the basic salary, instead one can go for the lesser PF deductions because 12% on Basic is the MAXIMUM PF deduction. You can deduct even less PF. 

That is better thing to do. In the kind of inflation we are living, reduction in basic will be treated as a fraudlent measure to avoid or evade.

i think u can not reduce the basic, u can reduce other perks but not basic

In my opinion as far as you do not reduce Basic salary to below Rs.6,500/- you can reduce PF contribution with a reduction in Basic Salary.  If basic salaries are reduced to below Rs. 6, 500, then you will have to pay PF on 6,500 at least.

Under the PF & Miscellaneous Act - I think section 12 - an employer is prohibited from decreasing the salary/ wages of an employee. In other words, if you decrease the basic such that the total contribution of the employers share and the employees share gets decreased, then that will cause the PF officials to raise an inquiry with the employer.

To reduce the basic salary, it is better to give increase on other salary components like travel allowance, etc but at the same time keeping the basic constant. That way the net salary will increase but the basic will remain the same, and over subsequent increases the basic will finally be reduced in ration to the net salary.

Hi

Since basic salary is the basis for arriving at EPF Contribution, Bonus, Gratuity, Overtime payment if eligible, Leave Encashment, no employee will accept a reduction is that as that not only affects their monthly pay but also the aspect noted above.

-Saravana Rajan.