Can States cut or defer salary of employees?

By M Sridhar  Published on  14 Aug 2020 4:51 AM GMT
Can States cut or defer salary of employees?

Hyderabad: Our governance is a very peculiar process. The rulers advise the private employers not to cut the salary of the employees during the Covid-19 crisis, as their personal economic situation will further collapse. But the government, being the biggest employer either at the centre or in states, cuts or defers the salaries of its employees. If they cannot stand as an example, how a private employee gets a full salary for his work, and how can he confront the coronavirus?

The governments bring ordinances. That means they make law, not the legislature, as the Legislative Assembly is not functioning due to COVID 19 to authorize themselves not to pay full salary.

Kerala' order challenged

Kerala Government has issued an executive order to cut a month's salary in five instalments of all its employees, including all state-owned enterprises, public sector undertakings, quasi-government organizations, and universities, among others. But later, that order was annulled by a single bench of the High Court. The court said it has no legal authority.

Order replaced by Ordinance

Then the government came back with an Ordinance on April 30 to defer one-month salary of state government employees, to be deducted in five instalments in order to meet the expenses of the ongoing fight against coronavirus pandemic. This Ordinance took care that the salaries of employees of court and judicial services will not be reduced. Kerala state would save around Rs 2000 crore which will enable it to fight coronavirus. The employees rushed to High Court again challenging the ordinance.

But the Kerala High Court refused to stay the ordinance. The judges agreed to the government's contention that it has the legislative powers to bring such an ordinance during the extraordinary situation and posted it for further hearing. The court said: "It is an extraordinary situation and the court cannot question the wisdom of the legislature in bringing out an ordinance, especially, when the ordinance does not partake of a character appropriating the salary but deferring it, for the time being, that too under the authority of law."

Restoration of salaries in AP

In fact, the AP government has restored full salaries from May. A retired judge Lakshmi Kameshwari has filed a PIL challenging the GO to cut her pension. The Andhra Pradesh High Court on 11 August 2020has struck down the State government's GO for deferred payment of 50 per cent of salaries and pensions. HC bench of Justice M Satyanarayana Murthy and Justice K Lalitha directed the government to pay the deferred salaries of March and April to employees and the deferred pensions of March to pensioners within two months along with 12 per cent interest per annum on unpaid part of salary and pension. The ordinance mandates the government to pay the deferred amount within six months from the date of deferment.

Andhra Pradesh Governments action appears to be reasonable as they did not cut the small employees whose salaries are less than Rs 10000. They have deferred a hundred per cent salary of CM and public representatives and 60 per cent from IAS, IPS, and IFS officers. However, the cut of 10 per cent of outsourced staff and reducing the pension should have been avoided. For other employees also fifty per cent cut appears to be unreasonable.

Liquor income

Interestingly, the people, perhaps employees also contribute to the income of the State Government by liberally consuming liquor. AP Government was estimated to have a turnover of Rs. 50 to 60 Cr per day on liquor sales, 30 per cent of which is share of the state.

The viewpoint of Kerala and Andhra Pradesh High Courts appear to be different on the principle of withholding part of salary or pension. In fact, the AP government has restored the full salary and pension and assured to pay the withheld amounts also. Kerala passed an ordinance which created two classes of salaried persons, - employees of courts and others. As the hearing is not completed, one cannot assume whether the Court accepts this classification or not.


Telangana Government announced first that it would withhold some salary and pension of its employees. Andhra Pradesh Government has withheld 50 per cent of salary for months of March and April because of the financial position arising out of the COVID 19 pandemic. On March 30, the state government had announced a 75 per cent cut in the salaries of the Chief Minister, state cabinet members, MLAs, and others besides a 60 per cent cut in the salaries of IAS, IPS and other such Central service officers in view of the COVID-19 pandemic adversely impacting the state''s economic situation. However, the police, doctors, sanitation workers, public representatives, and pensioners were exempted from this cut. The cut was 10 per cent for Class IV, outsourcing, and contract employees and it was 50 per cent for all categories of pensioners. The CM of Telangana said on 28 May 2020: "If salaries of the employees and pensions are paid, the expenditure would be more than ₹3,000 crores. The entire treasury will be empty and henceforth neither payment can be made nor any work can be undertaken. The state government must pay debt instalments to the tune of ₹37,400 crores per year. These instalments to be paid every month without fail."Several other states in India similarly withheld some part of salary and pension.


The Telangana Disaster and Public Health Emergency (Special Provisions) Ordinance 2020 was promulgated on June 19, to make special provisions for the deferment of payment of salaries, pensions and other dues in the event of a disaster and public health emergency in the State.

The ordinance enables the government to defer payment of monthly pay, pension, or remuneration to the employee, pensioner, or other persons to the extent not exceeding half (50 per cent) the total monthly payment during such period. Similar rules will be applicable to any institution-owned or controlled or aided by the State government including schools and college teachers, local self-government institutions, statutory bodies, universities, corporations, aided educational institutions, and other such organizations. However, this ordinance was not implemented. But on June 23, the Telangana government declared that it would pay full salaries to all as the economy of the state has improved.

Unless there is a financial emergency, the Constitution does not authorize the government to cut the salaries of its employees. When the police, public health, sanitation, and other emergency wings employees, including the staff of CM, secretaries, courts, etc are working overtime facing the health hazards increased by the covid19, how can a part of their salary is cut or deferred or withhold? Those who are working, in fact, need more money to tackle this special risk. Similarly, the pension, which is being secured, cannot be reduced.

What Constitution says

Article 360 of the Indian Constitution deals with provisions as to a financial emergency. Article 360(1) If the President is satisfied that the situation has arisen whereby the financial stability or credit of India or of any part of the territory thereof is threatened, he may by a Proclamation make a declaration to that effect

(2) A Proclamation issued under clause (1)(a) may be revoked or varied by a subsequent Proclamation;(b) shall be laid before each House of Parliament;(c) shall cease to operate at the expiration of two months unless before the expiration of that period it has been approved by resolutions of both Houses of Parliament: Provided that if any such Proclamation is issued at a time when the House of the People has been dissolved or the dissolution of the House of the People takes place during the period of two months referred to in sub-clause (c), and if a resolution approving the Proclamation has been passed by the Council of States, but no resolution with respect to such Proclamation has been passed by the House of the People before the expiration of that period, the proclamation shall cease to operate at the expiration of thirty days from the date on which the House of the People first sits after its reconstitution, unless before the expiry of the said period of thirty days, a resolution approving the proclamation has been also passed by the House of the People.

(3) During the period any such Proclamation as is mentioned in clause (1) is in operation, the executive authority of the Union shall extend to the giving of directions to any State to observe such canons of financial propriety as may be specified in the directions, and to the giving of such other directions as the President may deem necessary and adequate for the purpose

(4) Notwithstanding anything in this Constitution, (a) any such direction may include (i) a provision requiring the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a State;(ii) a provision requiring all Money Bills or other Bills to which the provisions of Article 207 apply to be reserved for the consideration of the President after they are passed by the Legislature of the State;

(b) it shall be competent for the President during the period any Proclamation issued under this article is in operation to issue directions for the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of the Union including the Judges of the Supreme Court and the High Courts.

States cannot declare a financial emergency

1. President alone has the authority to impose a financial emergency.

2. Only when the financial stability or credit of India or of any part of the territory is threatened.

3. The union can issue directions to states on matters of financial discipline.

4. States do not have any powers to declare a financial emergency or reduce the salaries in their states where there is no emergency, without direction from the Union.

5. Only President is competent to cut the salaries of all employees including the judiciary, during the proclamation of financial emergency.

This means the state has no power to reduce cut or defer the salary of employees without there being a financial emergency proclaimed or a direction to that extent from the Union. Covid19 created challenges to governance at all levels, besides seriously affecting public health and health of the economy.

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