Starting April 1, India’s new labour codes come into full effect. Now, an employee’s wages (which include basic pay, Dearness Allowance and retaining allowance) must be at least 50% of total pay (CTC).
Most private sector companies do not give DA and retaining allowance. This means that the basic pay has to be increased to 50% of CTC (if it's not at that threshold).
So far, many companies kept basic pay lower than 50%. This was mainly to reduce PF and gratuity payouts, since these payouts are calculated on basic salary.
What's in it for you?
LOWER TAKE-HOME SALARY: Your monthly in-hand pay may drop slightly. This is because if the basic salary is increased, the PF deductions, which are based on basic salary, may be higher.
ASK YOUR HR: However, the government clarified that PF contributions are based on a wage ceiling of up to Rs 15,000. This means that if the PF contribution is 12%, it has to be 12% of Rs 15,000. Anything beyond this is voluntary, not mandatory. So you may want to ask your HR whether the PF deduction is on this ceiling amount or on the full basic pay which may be more than Rs 15,000.
LONG-TERM SAVINGS MAY INCREASE: If PF deductions increase, it means more long-term savings. Gratuity can also increase as it’s based on basic pay.
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