New Labour Codes: Government Clears Confusion on Salary and Take-Home Pay
Amid preparations to notify the new labour codes, the Ministry of Labour has clarified concerns among employees regarding salary structure and take-home pay. On Wednesday, the ministry confirmed that employees whose Provident Fund (PF) contributions are calculated on the wage ceiling of ₹15,000 will not see any reduction in their take-home salary.
In a social media statement, the ministry said that even after the new labour codes come into effect, PF contributions will continue to be calculated on the ₹15,000 wage ceiling. Any contribution on salary beyond this amount will remain voluntary for employees, not mandatory.
PF Deduction Mandatory Only Up to ₹15,000
If your basic salary is below ₹15,000 and your revised wages increase under the new rules, PF deductions will still be calculated only on the ₹15,000 wage ceiling. This means your take-home salary will not decrease due to the implementation of the new labour codes.
However, some companies deduct PF on the employee’s full basic salary—without applying the ₹15,000 ceiling. In such cases, the take-home salary may be affected.
Whose Take-Home Salary Will Reduce?
According to the ministry, only employees whose PF deductions are not based on the ₹15,000 wage ceiling may see a reduction in take-home pay. Employees with higher basic salaries, where companies calculate PF on the entire basic pay, will see increased PF deductions because the new rules mandate that 50% of total salary must be treated as basic pay. As a result, PF contributions will rise, reducing the take-home amount.
Example: PF Calculation on a ₹60,000 Salary
The ministry illustrated this with an example:
If an employee earns ₹60,000 per month and PF is calculated on the wage ceiling of ₹15,000, both employee and employer will contribute ₹1,800 each.
This totals ₹3,600 in PF contribution, leaving the employee with a take-home salary of ₹56,400 — unchanged under the new labour codes.
Even with the 50% basic pay rule under the new codes, employees whose PF is calculated using the ₹15,000 cap have no reason to worry.