Labour Codes News: What may happen to your take home salary, PF savings money, DA amount, pay structure and more after implementation

Labour Codes News: The central government is likely to implement all the four labour codes in the next few months. Following the implementation of these four labour codes, the take-home salary of the employees will decrease, however, in a relief to them, the amount of employees' savings, that is, Provident Fund (PF) will increase.

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According to a PTI report, the four labour codes are likely to see the light of day in a couple of months as the central government is now keen to go ahead with the implementation of these laws. The implementation of these labour codes will result in the reduction in take-home pay of employees and higher provident fund liability of companies.

Change in the pay structure

According to the new wages code, allowances are capped at 50 per cent. This means that half of the gross pay of an employee will be basic wages. The PF contribution is calculated as a percentage of basic wage, which includes basic pay and dearness allowance (DA).

The employers have been splitting wages into numerous allowances to keep basic wages low to reduce provident fund and income tax outgo. As per the new wages code provision, the PF contribution will be a prescribed proportion of 50 per cent of the gross pay.

Hence, following the implementation of the new labour codes, the take-home pay of employees will reduce while their PF contribution will increase.

Consent from the states

As a matter of fact, the four codes on industrial relations, wages, social security and occupational health safety and working conditions that will rationalise 44 central labour laws had been envisaged to implement by the labour ministry from April 1, 2021. Though the ministry had finalised the rules under the four codes, the codes were not implemented due to the fact that many states were not in a position to notify rules under these codes in their jurisdiction.

Since labour is a concurrent subject under the Constitution of India and therefore both the Centre and states have to notify rules under these four codes to make them the laws of the land in their respective jurisdictions.

A source told PTI, "Many major states have not finalised the rules under four codes. Some states are in the process of finalising rules for the implementation of these laws. Central government cannot wait forever for states to firm up rules under these codes. Therefore, it is planning to implement these codes in a couple of months as some time would have to be given to establishments or firms to align with new laws."

According to source some states like Uttar Pradesh, Bihar, Madhya Pradesh, Haryana, Odisha, Punjab, Gujarat, Karnataka and Uttarakhand had already circulated the draft rules.