Expect retirement savings to rise, monthly take-home pay to reduce

Re-evaluate if old or new tax regime suits you better after revision in salary structure

- SANJEEV SINHA

The rollout of India’s four labour Codes marks a significant shift in labour governance. By simplifying decades-old regulations, the Codes aim to enhance efficiency, consistency, and worker protection.

However, both employers and employees will need to adapt to changes in wages, provident fund (PF), gratuity, and soon.

Impact on employees

The Codes strengthen worker safeguards through a uniform national minimum wage, timely salary payments (by the 7th of next month), faster full-and-final settlements (within two days), and extended gratuity benefits for fixed-term employees.

“The Codes also restrict contract labour in core activities, promote permanent employment, allow leave encashment beyond 30 days and, importantly, bring gig workers under social security for the first time.” says Alok Agrawal, partner, Deloitte India.

Impact on salary and CTC

The new definition of wages brings uniformity across labour Codes. “Key changes include a clearly defined list of exclusions and a formula that treats any excluded components exceeding 50 per cent of total remuneration as part of wages for statutory calculations,” says Arjun Paleri, partner, BTG Advaya.

Employers will have to revisit salary structures. “While wages may not necessarily rise or fall, components like house rent allowance (HRA) and other allowances — now explicitly excluded — will need to be balanced within the 50 per cent cap. Any excess will be added back to wages for PE, gratuity, and other benefits,” adds Paleri. CTC composition, monthly take-home pay, and end-of-service benefits may be affected.