Top News

The new labor code implemented in the country will completely change your salary structure. The government has created four major labor codes by combining 29 old labor laws. They aim to simplify regulations for companies and provide better social security to employees. But the biggest question after their implementation is: will this increase or decrease your monthly in-hand salary? The simple answer is: your salary may decrease slightly. Now you might be wondering why? So let's understand the complete calculation from an expert.

How will it affect salary and PF?
Dr. Rahul Singh, Associate Professor at OP Jindal Global University, explains, "The new labor code may impact employees' take-home pay, but this will entirely depend on how companies implement it. Under the new rules, it will be mandatory to keep the basic salary at least 50% of the total CTC. This will increase PF and other deductions, which may result in a slight decrease in the in-hand salary."

However, Dr. Singh says that companies can manage the salary structure of their key and high-performing employees differently. If an employee refuses to accept a lower take-home salary, the company can restructure their CTC to balance their in-hand salary.

What will be the biggest change?

Under the new rules, your basic salary will now be required to be at least 50% of your total CTC. Until now, many companies kept the basic salary at 30-35%, and allocated the remaining amount in components like HRA, special allowances, and travel allowances. This made the employees' take-home salary appear higher because deductions were lower.

What will change with the increase in basic salary?
Several important components of your salary are linked to your basic salary:

PF (Provident Fund) = 12% of your basic salary
Gratuity = Based on your basic salary
Leave encashment = Linked to your basic salary
Now, if your basic salary increases, your PF deductions will also increase. This means the amount deposited into your account each month will decrease slightly. But on the other hand, your PF fund will grow, giving you more money at retirement.

So, will this also impact your tax?

Experts believe that many allowances that were previously tax-free or tax-saving will now have a reduced share. An increase in basic salary may increase taxable income, which could lead to slightly higher taxes. This will also have a slight impact on your in-hand salary.

Could this cause any harm?

Experts believe that at present, you won't suffer any loss. Even if you earn a few thousand rupees less each month, you will have a larger retirement fund. You will receive higher gratuity and increased leave encashment benefits.

Furthermore, the new rules mandate free or affordable health checkups for employees over 40 years of age. This won't be reflected directly in your salary, but it will reduce medical expenses. The new labor code will put a little less money in your pocket each month, but it will strengthen your savings and security for the future.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.