New Wage code latest news: With the implementation of the New Wage code, most people have the same thing in their mind that they will suffer. You will get less money. But it is important to know and understand its benefits.
New Wage code latest news: You must have heard that your salary structure is going to change. The component of Basic Salary will be 50% or more of the total salary. The hefty amount of allowances will now be less. With this, everyone must have understood one thing that the take home salary i.e. the salary in hand will be reduced. It must have been tension. But, is the new wage code really bothering you? Is it only visible damage? Let us know what will be its advantages and disadvantages.
Basic salary will increase, allowance part will decrease
To promote reforms related to employees, the government prepared 4 new labor codes by adding 29 labor laws. These have been given the name of New Wage Code. In the Wage Code 2019 itself, there is a provision that in the salary that companies will give to their employees, the share of basic salary will be 50 percent of the total salary (CTC). Till now, companies keep the basic salary part low and the reimbursement-allowance part high. These include allowances like Leave Travel Allowance (LTA), Overtime and Conveyance allowance. With the implementation of the New Wage Code, there will be a change in the salary structure of the employees. However, when this will come into effect, its date has not been decided yet. It was to be implemented from 1st April this year. But, till now the government has not notified it.
Will it apply or not?
The New Wage Code is not implemented yet, it does not mean that it will never be implemented. Because, after the approval of the President, this law has become a law. So it will be applicable. Therefore it is important to know what are the advantages and disadvantages of change.
Your salary will be the same, there will be no change in it. Some of the figures will be scaled up or down in just the salary structure or u say salary slip.
If the basic salary component is less than 50%, then it will increase to 50% or more. If your basic salary is 50% of the total salary, then believe me there will be no change.
What will be the benefits of New Wage Code?
Provident Fund: Provident Fund is deducted from your salary, its calculation is done on the basic salary. 12% of basic salary goes to EPF. The same part is also deposited on behalf of the company. By increasing the basic in the new salary structure, the contribution of you and the company will also increase. For example- Your salary is Rs 40,000, whose basic is Rs 15,000. The basic will increase to Rs 20,000 in the new structure. Meaning that earlier Rs 1800 was deposited in PF from one share, whereas now at least Rs 2,400 will be deposited. 600 + 600 will increase from both the sides. Interest will also be available on the annual deposited capital, which means that the pension corpus will be very high on your retirement.
Gratuity: Gratuity is a long term benefit plan. An employee who works continuously for 5 years in a company gets it. Its calculation is also done on Basic Salary. With the implementation of the new Wage Code, the employer will have to spend more money for this as well. The employee will get more amount as gratuity.
Income Tax: Above we mentioned that your Provident Fund share will be higher after the implementation of the New Wage Code. Meaning more money will be deposited in it. If there is more investment, then the tax savings will also be more. However, one thing to keep in mind is that if you deposit more than Rs 2.50 lakh in a financial year in the Provident Fund, the interest earned on the amount above that will be taxable.
Bank loan: Very few people know that while applying for the loan, the bank does not see your in hand salary but basic salary. In such a situation, by increasing the basic salary, your chances of getting a loan will also increase. The higher the basic salary, the more chances of getting a loan on easy installments.
Job Change: People often ask your CTC after leaving the job. But, whenever the HR of the new company talks about your salary, he also prepares the complete structure on the basis of basic salary. If the focus of the new company goes to your basic salary, then you will get a new hike on the increased basic salary. That means you have an advantage in this too.
Government gain and company loss
With the implementation of the New Wage Code, the change in the salary structure will also have an impact on the companies, they will have to fill more EPF. Gratuity will also have to be paid more. At the same time, the government will get more money in the form of tax. This will benefit him. Your CTC may increase if the company changes the salary structure. To keep the take home salary the same, the company will not change it.
