With the new labor law, your in-hand salary will be reduced starting today, August 31. Let's find out the reasons for this, and who will benefit and who will suffer.

Salary Structure As Per New Labour Law: What is the salary as per the new labour code?

If your salary is credited to your bank account every month, this change related to the new labor codes is extremely important for you. Under the new rules, companies will have to modify their salary structure so that the salary component accounts for at least 50% of the total salary. This could particularly impact employees whose salaries are low in basic pay and high in allowances.

What is the 50% rule?
According to the new Labor Code, if the total of an employee's salary, including allowances and other non-included components, exceeds 50% of the salary, the amount above 50% will be added to the salary. This means that companies cannot keep the salary limit too low by showing a large portion of the salary as various allowances. The government has also cited this example.

Why might your in-hand salary decrease?
If your current salary structure involves a low basic pay and high allowances, your PF amount will increase. This won't necessarily reduce your CTC, but it could reduce your monthly in-hand salary. In turn, more money will go towards benefits like PF and gratuity.

Suppose your salary is ₹60,000, and currently your basic salary and DA are only ₹20,000, while the remaining amount is received as allowances. According to the 50% rule, the salary limit should be around ₹30,000. In such a situation, the salary structure will be adjusted. If PF calculations are made based on this increased salary limit, the employee's PF contribution may also increase. This means more money will go into PF than before, and the monthly in-hand salary may be slightly lower. The Labor Code does not mean that the basic salary will be directly increased to 50% of every employee's total salary.

What are the benefits?
A higher salary limit can increase the amount eligible for benefits like pension and gratuity. This means that while your in-hand salary may be slightly lower today, it could increase your retirement savings and gratuity benefits in the long term.

Will everyone's in-hand salary decrease after August 31st?
No, it's not accurate to say that every salaried employee's in-hand salary will decrease after August 31st. Whether you will be affected depends on your current salary structure, PF calculations, allowances, and your company's payroll policy.