The New Labour Codes, which came into force from 21 November 2025, represent one of the biggest overhauls of India’s labour laws. They consolidate 29 existing laws into four comprehensive codes covering wages, social security, industrial relations, and safety‑health conditions. The changes affect employers and employees alike — especially how salaries and benefits like Provident Fund (PF) and gratuity are calculated.

1. What’s Changed: Redefinition of “Wages”

Under the new system:

✅ Employers must ensure that basic pay + dearness allowance (DA) + retaining allowance together form at least 50 % of the total Cost to Company (CTC).
❌ Components like HRA, bonuses, and other allowances cannot exceed 50 % of the salary. If they do, the excess must be added back to the “wage” for statutory benefit calculations.

Why this matters:
Previously, many companies kept basic pay low and allowances high to reduce statutory deductions (like PF, gratuity), boosting take‑home pay. The new rule aims to standardize salary structures and improve long‑term benefits.

2. Impact on PF (Provident Fund) Deductions

Key Clarification from Labour Ministry

The Ministry has explicitly stated that:

✔ If your PF deduction is based on the statutory wage ceiling of ₹15,000 per month, your take‑home salary will not decrease under the new labour codes.
✔ PF calculations will continue to be capped at this ₹15,000 limit unless you and your employer voluntarily choose to contribute more.

What this means in practice:

· Suppose your basic + DA is increased on paper to meet the 50 % rule — but your PF contribution is still based on the ₹15,000 statutory wage ceiling.

· Then both employee and employer PF contributions stay at ₹1,800 each per month (12 % of ₹15,000), just as before.

· As a result, your take‑home salary remains unchanged even though the wage definition on paper has changed.

👉 This clarification helps calm anxiety among many salaried workers who feared automatic cuts in take‑home pay due to higher deductions.

3. When Could Your Take‑Home Salary Change?

Although the government says most employees will not see a reduction purely because of the new codes, take‑home pay may still change in these situations:

🔹 Voluntary higher PF contributions: If you and your employer agree to calculate PF on your actual wage (which could exceed ₹15,000 due to the new 50 % rule), then higher PF will be deducted, reducing net pay.

🔹 Company salary restructuring: Some employers might adjust allowances or benefits to meet compliance, which can indirectly affect the net take‑home amount if CTC is not increased.

4. Other Effects on Benefit Calculations

📌 PF and Gratuity

· With a higher defined wage component (minimum 50 % of CTC), PF and gratuity benefits are likely to grow over time.

· Gratuity is calculated based on wages, so a higher statutory wage base improves retirement benefits.

📌 Standardized Salary Structure

· The new rules make salary structures more consistent across industries.

· Some allowances may get reduced or redata-aligned to comply with the statutory wage definition.

📌 Tax Implications

· A higher basic component may also affect tax calculations and take‑home pay — but PF contributions continue to benefit from existing tax exemptions up to prescribed limits. (Detailed figures depend on individual salary structures.)

5. What Employees Should Do Now

📌 Check Your Salary Break‑Up

Ask HR for your revised structure to understand:

· New basic pay vs. total CTC

· PF contribution base

· Any voluntary contributions being applied

📌 Confirm PF Basis

Ensure PF is being calculated at or up to the ₹15,000 statutory wage ceiling to protect your take‑home pay.

📌 Understand Long‑Term Benefits

Although short‑term take‑home pay might adjust, the changes are designed to enhance retirement benefits (PF & gratuity) and reduce salary‑structuring disparities.

Summary — What the government Has Clarified

✅ The new labour codes do not automatically reduce take‑home salaries if PF is calculated at the existing statutory ₹15,000 ceiling.
✅ PF and gratuity calculations will remain capped unless both employee and employer opt for higher contributions.
✅ Salary structure will change — with basic pay required to be at least 50% of the total package — but the net salary impact varies by individual circumstances.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.