• Impact of the new labor code on employees?


• PF, gratuity and social security will be available


• Will this decision increase future financial security?

New Labor Code: Due to the new labor code implemented in India, the salary received by the employees is likely to decrease. Increased basic pay and higher PF deductions are expected to reduce in-hand pay, but increase gratuity benefits. This implementation has led to significant changes in the salary and social security structures of employees. Many employees are wondering if their in-hand salaries will decrease. Will the new changes affect the PF, gratuity and CTC structures? Read this news till the end to know..

The Government of India has enacted four new labor codes this year. They are Wages Code 2019, Industrial Relations Code 2020, Social Security Code 2020 and Occupational Safety, Health and Working Conditions Code 2020. This will directly affect the salary structure, PF contribution and gratuity benefits.

According to these new rules, the basic pay and DA must be at least 50% of the total salary. This will cause companies to cut allowances and increase base wages. The increase in basic pay will also increase PF and other statutory deductions, which may reduce the take-home pay. It is also expected to affect PF and gratuity. Gratuity is calculated on basic pay, so increase in basic pay will increase future gratuity. Earlier, gratuity benefits were available after 5 years, but now fixed term or contract employees will be eligible for gratuity only after 1 year of service. Mill workers and platform workers will also be eligible for social security benefits.

If the basic pay is increased, the PF and other contributions will also be deducted more. Therefore, even if the CTC remains the same, the in-hand salary may appear lower. Younger workers and those with lower base wages and higher perks will be hit the hardest. Overall, while the take-home pay may be lower, the long-term benefits can be reaped. Long term gratuity, PF savings and retirement security will all increase significantly. It is considered as a major initiative to strengthen the financial future of employees.