The four New Wage Code laws, expected to be enforced by the Narendra Modi government from the beginning of the next financial year, are likely to be implemented initially in 13 states, who have finalized draft rules. These laws will enable an increase in salary. At the same time, it is likely to lead to a cut in take-away salary.
There will be a change in your take home salary and Provident Fund structure. Due to which your take home salary will decrease, while provident fund PF will increase.
Four labor codes on wages, social security, industrial relations and occupational safety and health and working conditions are likely to be implemented by the next financial year. According to a senior official at least 13 states have prepared the draft rules for these laws.
The Center has finalized the rules under these codes and now the states have to make rules on their behalf, because labor is a subject of the concurrent list. The Center had completed the process of finalizing the draft rules for these codes in February 2021, but since labor is a concurrent subject, the Center wants the states to implement it simultaneously.
With the new law, there will be a significant change in the method of calculation of basic salary (Basic) and provident fund of employees. There is also an advantage of this that every month the contribution in your PF account will increase.
Under the new wage code, the allowances will be limited to 50 percent. This means that 50 percent of the total salary of the employees will be the basic salary. Provident fund is calculated on the basis of percentage of basic pay, which includes basic pay and dearness allowance.
PF share will increase
At present, employers divide the salary into several types of allowances. This keeps the basic salary low, thereby reducing the contribution to provident fund and income tax. In the new wage code, the provident fund contribution will be fixed at the rate of 50 percent of the total salary.
Increasing the contribution of employees in PF will increase the financial burden on companies. Along with this, a higher basic salary means that the amount of gratuity will also be higher than before and it can be one to one and a half times more than before.
At the same time, Union Labor Minister Bhupendra Yadav, in response to a question in the Rajya Sabha earlier this week, said that at least 13 states have prepared the draft rules of the Labor Code on occupational safety, health and working conditions.
Apart from this, 24 states and union territories have prepared draft rules of labor code on wages. 20 states have prepared the draft rules of the Industrial Relations Code and 18 states have prepared the draft rules of the Social Security Code.
There are three to four components in the Cost To Company (CTC) of an employee. Basic salary, House Rent Allowance (HRA), retirement benefits like PF, gratuity and pension and tax saving allowances like LTA and entertainment allowance.
Now in the new wage code, it has been decided that allowances cannot exceed 50 percent of the total salary at any cost. In such a situation, if the salary of an employee is Rs 40,000 a month, then his basic salary should be Rs 20,000 and his allowances should come in the remaining Rs 20,000.
4 days a week work offer
Many such provisions have been given in the new wage code, which will affect even the salaried class working in the office, workers working in mills and factories. From the salary of the employees to their holidays and working hours will also change. Under the new wage code, the working hours will increase to 12. The Ministry of Labor and Employment said that in the proposed Labor Code, it has been said that the rule of 48 hours of work in a week will be applicable.
In fact, some unions had raised questions on the rule of 12 hours work and 3 days leave. In its clarification on this, the government said that there would be a rule of 48 hours of work in a week, if someone works for 8 hours a day, then he will have to work 6 days a week and will get one day off.
