Due to the new labor codes implemented in India, there is a possibility that employees' take-home pay may decrease. It is anticipated that the increased basic salary and higher PF deductions will reduce the in-hand salary, but gratuity benefits are expected to increase. This implementation has led to significant changes in employees' salary and social security structures. Many employees are wondering if their in-hand salary will decrease. Will the new changes affect PF, gratuity, and CTC structures? Read this news to the end to find out..
The Government of India has implemented four new labor codes this year. These are the 2019 Wage Code, 2020 Industrial Relations Code, 2020 Social Security Code, and the 2020 Occupational Safety, Health, and Working Conditions Code. This will directly impact salary structure, PF contributions, and gratuity benefits.
According to these new rules, at least 50% of the basic salary and DA must be part of the total salary. Companies will reduce and increase allowances due to basic salary. PF and other statutory deductions will also increase due to the increase in basic salary, which may reduce take-home pay. It is also speculated that this will affect PF and gratuity. Gratuity is calculated on the basic salary, so increasing the basic salary will increase future gratuity. Previously, gratuity benefits were available after 5 years, but now fixed-term or contract employees will be eligible for gratuity after just 1 year of service. Social security mill workers and platform workers will also be eligible for benefits.
If PF and other contributions increase, more will be deducted even if the basic salary increases. Therefore, even if the CTC remains the same, the in-hand salary may appear lower. Young employees and those with lower basic salary and higher allowances will be most affected. Overall, even though the take-home salary is lower, long-term benefits can be gained. There will be a significant increase in long-term gratuity, PF savings, and retirement security. This is considered a major initiative to strengthen the financial future of employees.