How new labour codes impact your gratuity, PF

The new labour codes have overhauled how wages, gratuity, provident fund (PF), pension and other social security benefits are calculated. These changes impact employees and employers alike.

- BY SHIPRA SINGH

Mint explains who benefits and what happens to take-home salaries:

What is the new definition of wages?

Under the four new labour codes, definition of 'wages' is standardised to include basic pay, dearness allowance and all other retaining allowances in the CTC that are not specifically exempted. Exclusions include HRA, conveyance allowance, employer PF contributions and commission, as per The Code On Wages, 2019. But together they cannot exceed 50% of total remuneration. This means at least half of an employee's CTC is treated as wages for calculating gratuity, PF, ESIC, maternity benefits and other social security entitlements, expanding the base for contributions and benefits significantly.

Will gratuity, PF increase?