Salary reduction

If your employer asks you to work fewer hours or take a pay cut, this is a change to your contract of employment. Any change to your contract of employment must be agreed by both you and your employer. When deciding whether or not to agree to working reduced hours or to a reduction in pay, there are a number of issues to be considered:

• Reduced pay – what are the implications of this – for example, money and tax and paying the rent or mortgage
• Scheduling of working hours – it may suit you and your family to reduce your hours, for example working a day less per week or 2 hours less each day.
• Downturn in business – what choice do you have. If you don’t accept a reduction in your working hours or pay, your employer may decide to make youredundant.

You should ask your employer to give you written details of this proposed change to your contract of employment including a review date. You should respond to this in writing and if you are proposing to accept the change, you should stress that your acceptance is temporary. At the review date the change to your contract can be reconsidered and you could ask to return to the original terms and conditions of your contract.

Minimum wage: In some cases an employment contract or terms of employment will say that an employee is paid at the "prevailing National Minimum Wage hourly rate". Where this is the case, an employer may reduce the employee's pay in line with the minimum wage rates. In other cases there may be a provision in the contract that provides for a reduction in pay. Where this is not the case, your employer cannot reduce it without your agreement, as this would change the terms of your contract of employment. Again, you may agree to reduced wages, if, for example, the alternative may be reduced hours or redundancy in the current economic situation.

Thanks Rama Chary Sir,

If the employee is not willing to agree to the proposed change and if the employer initiates a termination, will this qualify for a constructive dismissal.

Pls advise.

Thanks,

Uday

If the employee rejects to accept the change the employer can proceed to terminate………………!!!

Who can stop and adamant and recalcitrant employer……….!!

In the sectors like yours where the employees are not united and there no mighty unions or support of strong trade unions such episodes do happen.

There are points to ponder::::

Salary cannot be reduced during the period of employment at all until and unless it is done as punishment after due domestic enquiry and as the terms and conditions of Offer of Appointment.

It is felt that Payment of Minimum Wages Act protects the current salary of the employee.

PF and ESI act prohibit reduction in salary and reduction/liability in employer's contribution. Employees can agitate under ID act and any other enactments applicable in the State.

Has the employer renegotiated salary with each individual employee and taken acceptance?

Has the company given days notice as per Sec9A of ID Act?

In a scenario like loss of market or recession, if the employer finds that the wages are to be reduced the same should be intimated to the employees at least 21 days of its implementation following section 9A of the Industrial Disputes Act which tells that conditions of service should not be changed without giving the employees at least 21 days notice.

Is the new basic salary less than current minimum wages? Has any employee raised a question on payment of gratuity as per new basic if new basic salary is less than previous basic salary?

It should not be done with a view to reducing the net take home salary of employees.

If the company wants to follow some practices to sustain, they should come out with other means of cost reduction such as reducing the allowances of officers, cutting short benefits other than statutory, with holding of leave encashment, cutting short the electricity bill by means of switching off the ACs of higher Officials etc. It should not be done at the cost of employees alone.

By law, employers cannot unilaterally cut an employee's pay.

There are some other pertinent questions e.g.:

- If in exceptional circumstances such as recession, non availability of projects, poor business, low demand, if the employees agrees, would the company agree for any subsequent  payments and rise in wages……….

-Would the company allow working part-time elsewhere? No one should agree to a cut in pay without raising the implications on any employer-run pension scheme.

-Is the company reducing the salary below minimum wages?

-Is the company reducing even the basic salary? Basic component of salary should remains as it is.

Is the company reducing only the perks?

When a company plans lay-offs it may have a severance plan in effect. Has the company offered any severance payment if your employment is to be terminated.

Has the company communicated cut in wages/salary or CTC and is it in writing?

Is there any hint in writing even if by email that in case of non acceptance the employment shall be terminated?

Such matters are best attended with the support of trade unions and community support.

Noise levels shall be high.

You may approach with copies of all documents on record, trade union leaders, and lawyer; give inputs in person and proceed under expert advice.

IT employees have made the things happen in the past also and must unite.

Unions for IT Sector/BPO:

https://www.itecentre.co.in/

https://ithiworld.wikispaces.com/News+Update

IT/BPO Voice of India | Facebook

CBPOP (the present UNIDOC)

https://www.itpfindia.org/

www.unitespro.org

https://www.wbitsa.org/ 

IT employees are net savvy, possess analytical mind, are brilliantly intelligent…………………

Trade unions have been trying to organize them.

You may find the attachments useful.

You may find some other threads also relevant.

https://www.lawyersclubindia.com/forum/3-months-notice-need-advise-86737.asp#.UhNN0dKAqWM

.

Dear Mr.Ramachary,

I am working for an IT MNC. I had joined for 25 lakhs CTC 15 months ago. Due to some issues with management I got low performance rating. Company has put me on Performance ImprovementProgram for 3 months. I had successfully cleared it. But while PIP is going on, my comapny unilaterally reduced my salary. Company removed my performance pay of 4 lakhs from joining CTC. In the offer letter it was mentioned that this variable pay can undergo a change based on performance. But this landed me in a situation where I cannot get job in any other company as current salary is less than salary in offer letter.

Just want to know is this leagal. Is there any law that prohibits employer from deducting performance pay. Please suggest.

-Kamal Kumar