New Labour Laws: How new wage code will affect your take home pay, PF, house rent, gratuity, conveyance | EXPLAINED

New labour laws are in the offing for employees. That is because new rules under wage code are likely to be put into effect from April. This move will directly impact the employees pay. Once implemented, these codes will bring host of changes in salary structure as under the new laws, all allowances of an employee, including leave travel, house rent, overtime and conveyance, have be to be capped at 50% of the CTC.   As per media reports, the Ministry of Labour and Employment is likely to complete the process to finalise the rules for four new labour codes/laws soon which would be implemented from the coming fiscal year.  

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Though the new labour laws may reduce the take-home pay of employees, components like PF and Gratuity might rise. Also, interestingly, the government may also change the existing time limit of overtime under the new Labour Law and working more than 15 minutes beyond the scheduled hours. Companies will have to pay their employees for this. That is, after the completion of working hours, if an employee works for even 15 more minutes, the company will have to pay for it. 

With the allowances capped at 50% of CTC, this could result in a lesser take-home salary for employees as companies may have to bear additional costs towards provident fund and gratuity.

As per a report by Hindustan Times, the new labour laws will prompt the companies to restructure the CTC as they cap several allowances including LTA, house rent, overtime and conveyance at 50% of the total CTC. The definition of the term 'wages' has been revised under the Code on Wages 2019 and it comprises three components now - basic pay, dearness allowance, and retention payment.

Some other components have been excluded from 'wages' such as conveyance allowance, HRA, pension and PF contribution, overtime, gratuity, and statutory bonus. If any of these exclusions, in aggregate, are over 50% of the CTC, barring special allowance, the extra amount will be added back to the wage.

According to an official associated with the development cited by Zee News, the Ministry of Labour has consulted all stakeholders regarding the new labour laws and all the processes will be completed by the end of this month. After this, the process of implementing the rules will be started.