New Wage Code – Under the new rule, all allowances cannot be more than 50 percent of the total salary. That is, the basic salary in the salary will have to be 50 percent or more.
It is likely to come into force from 1 April 2021. With the implementation of the new Wage Code, your take home salary will be reduced. As per rules, the contribution of gratuity and provident fund will be at least 50 percent of the total salary of the employees. To follow this rule, employers will have to increase the basic salary of their employees by 50 percent. This would mean that in-hand pay of employees could be cut.
What is special in the new labor code?
Under the new rule, all allowances cannot be more than 50 percent of the total salary. That is, the basic salary in the salary will have to be 50 percent or more. This will increase PF, gratuity will increase, but these hand salary will decrease. After the arrival of new labor code, the burden on the company will increase. Also, if an employee works more than 8 hours a day or more than 48 hours in a week, then he will get double the normal salary overtime.
What is the current salary structure now?
Generally, the compensation structure in all industries in India includes basic salary and allowance. Basic salary is 30 to 50 percent of the gross. According to the new rule, every company will have to change the salary structure so that the basic salary can be 50 percent of the total CTC and the remaining allowance will remain in the remaining 50 percent of the salary.
Now, instead of 5 years, gratuity can be available in 1 year, those working will get big benefit
What will be the effect on PF contribution?
Under the new rule, the basic salary will be at least 50 percent of the total CTC. Provident fund is calculated on basic salary only. In such a situation, the PF contribution of the employee will increase. Due to this, the contribution of the employer to the PF will also increase. Extraordinary companies also keep their shares in the total salary package of the employee. Meaning both these parts are deducted from your annual salary. By increasing the contribution to PF, you will get more benefits after retirement. Apart from this, gratuity will also increase, it is also calculated on basic salary only.
Gratuity will have to be given
If the basic pay and gross ratio is around 30 percent and after the implementation of the wage code, it can be increased to 60 percent. In such a situation, there may be double burden on companies. Also, payroll employees will have to pay a gratuity, whether they complete the job for 5 years or not. With the new code, the employee can avail leave encashment at the end of every year.
How much will the company’s bill increase?
Spending on pay-roll employees will increase, as gratuity will become mandatory. High Salary and Mid Salary group will have less burden, but in the Lower Salary Range Group, the company’s expenditure will increase by 25 to 30 per cent. He said that the increment could be affected this year.
What is the new definition of wedge?
The new codes include basic pay, DA, retaining and special allowances in the wedge. HRA, Convenience, Bonus, Overtime Allowance and Commissions are excluded from this. According to the new rule, all allowances cannot be more than 50 percent of the total salary. If it is more than 50 percent, then the higher amount will be considered as part of the wedge. For example, earlier gratuity was calculated according to the basic salary i.e. basic salary but now it will be given according to the wage.
Understand how these hand salary will be reduced,
assuming that someone’s salary is 10 lakh rupees annually. So according to the new wage code, 50 percent basic salary will be. That is 5 lakh rupees. In the current rules, it is kept up to 30 percent. Means 3 lakh rupees
Existing New Wage Code
Basic Salary (Annually) – Rs 3 Lakh Rs 5 Lakh
Basic Salary (Monthly) – Rs 25 Thousand Rs 41 thousand 666
Provident Fund Contribution – Rs 3 Thousand Rs 5 Thousand
means that the total contribution of your PF has increased, but In hand salary reduced.
