The Ministry of Labour and Employment shared an example in its official post and said that there is no need for employees to be confused in the new labour code because despite the change in the salary structure, there will be no direct impact on take-home pay.
New labor code: The implementation of the new labor code has changed many rules related to working people. However, some rules raise many questions. One such question concerns take-home salary (the total amount received in cash). Now, the Ministry of Labor and Employment of the Central Government has issued clarification on this matter.
What did the Ministry say?
According to the Ministry of Labor and Employment, there will be no change in employees’ take-home salary after the implementation of the new wage code, provided PF deductions are made at the current statutory limit, i.e., the wage ceiling of ₹15,000. The Ministry shared an example in its official post, explaining that employees need not be confused because despite the change in the pay structure, their take-home salary will not be directly affected.
Explained with an example
The Ministry explained through an example that an employee’s total salary is ₹60,000. This includes basic salary plus dearness allowance of ₹20,000 and allowances of ₹40,000. Under the new code, if allowances exceed 50% of the total salary, the additional amount is added to the wages. Based on this, the employee’s wages after the new code are assumed to be ₹30,000. Despite this, the mandatory PF deduction is made only at the wage ceiling of ₹15,000, so the PF deduction for both the employee and the employer remains the same at ₹1,800 each.
According to the clarification issued by the Ministry, the take-home salary will remain at ₹56,400 as before. Employees and employers can voluntarily make deductions above the ₹15,000 wage ceiling if they wish, but there is no legal requirement for this. This clarification by the government comes at a time when many concerns are spreading among employees regarding the Wage Code and its potential salary structure. Claims were being made on social media and various platforms that the new Code would reduce the take-home pay, but the Ministry dismissed these claims as false.
