India’s new Labor Codes are going to be implemented from November 21, and they will have a direct impact on your salary structure, CTC, take-home salary, PF, gratuity and tax planning. In this video, we will understand in very simple words how the breakup of your salary will change after the implementation of the New Wage Code. The biggest change has come in the definition of Basic Wages. From now on Basic Salary + Dearness Allowance (DA) + Retaining Allowance — including these three, at least 50% of your total salary will be considered as basic wages. Earlier, companies kept the basic salary at 30-40% and included allowances like HRA, Used to increase conveyance etc., due to which you would get more take-home salary. But under the new rules, allowances cannot now exceed 50% of the total CTC. If the allowances exceed the 50% limit, the extra portion will be added back to the wages (basic). This means – Basic salary will increase, PF and gratuity will increase, long-term benefits will be strong but take-home salary may decrease slightly.

New Labor Laws: The Government of India has included four new codes in the 29 year old labor laws. Notification of new applicable codes has also been issued on November 21, 2025, after which companies will have to make major changes in their salary structure. In the labor codes implemented by the government, more attention has been paid to social security, but it can also be a disadvantage for the employees, such as their take home or in-hand salary may be reduced.

Actually, under the new Labor Code, the basic salary of the employees must be at least 50 percent of their CTC. Till now, companies used to increase the allowances of their employees by keeping their basic pay low, which included HRA, DA etc. By doing this, the PF and gratuity contribution of the employees was reduced and their take home salary was higher. Now let us understand what kind of changes have been made in the new labor code and by how much the take home salary will be reduced.

Why were new labor codes brought?

The purpose of implementing the new labor code is to ensure social security of the employees. The purpose of increasing basic salary to 50 percent of CTC is that their contribution towards PF and gratuity will increase, due to which they will have a strong fund at the time of retirement. This will provide long term benefits to the employees, but at present the burden on their pockets may increase.

Understand the complete calculation like this

Let us assume that the CTC of an employee is Rs 50000. In this his basic salary is between 15 to 20 thousand rupees. On this, 12 percent PF contribution is deducted, which is between Rs 1800 to Rs 2400. Now with the implementation of the new labor code, companies will have to pay 50 percent of CTC basic salary to their employees. According to 50 thousand CTC it becomes 25 thousand. On this, PF contribution will be Rs 3000, which is more than Rs 1200 to Rs 600. This will increase retirement savings, but Rs 1200 more will be deducted from the take home salary. Similarly, gratuity will also be deducted on take home salary.

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Gratuity Rules: Nowadays, changing jobs is common and many people look for a new place even before the completion of one year. Earlier the problem was that to get gratuity, minimum five years of service was required. But now the government has made a big change in it. 4 new labor laws have been implemented in the country. According to their provisions, the limit of gratuity has been reduced from five years to one year.

This means that even if someone has completed just one year of service. So he can become entitled to gratuity. Now the question arises that if an employee resigns after working for 11 months and completes the notice period of 30 days. So will it be considered as one year and will he be entitled to gratuity. Let us tell you its complete information.

Will 11 months and 30 days notice be considered as one year?

Now after the introduction of four new labor laws in the country, the rules of gratuity have changed. In which now gratuity will be available after one year. But if someone worked for 11 months and served the notice period for 30 days. So will this be considered as one full year of job? So let us tell you that the tenure of the job is counted only from joining till the last working day. The notice period is considered included only then. When it is recorded as service time of the company. If you worked for 11 months and after that the notice period of 30 days was also counted as working tenure by the company.

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So the total period can be 12 months i.e. one year. In such a situation, you come under the scope of claiming gratuity as per the new rules. But if the company does not include the notice in the working period and considers it just a formality. So your period will not be considered as 12 months. Therefore, it is most important to see till what date the company has recorded your last working day.

What benefit will the employee get after the new rule?

The new change of the government has brought relief for those employees who work for short periods or keep changing jobs frequently. Earlier, due to the obligation of five years, lakhs of employees did not get gratuity. Whereas he would have made a real contribution to the growth of the company. Now gratuity can be received even after working for just one year.

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Due to which those working at the initial level will get direct benefit. If you have completed one year or your service period is considered as one year in the records of the company. So you can claim gratuity. For this, an application has to be made to HR and if necessary, a complaint can also be made to the Labor Department.

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Last year, the Department of Pension and Pensioners Welfare (DOPPW) increased the maximum limit of gratuity for central government employees to Rs 25 lakh. This change came into effect from January 1, 2024, when dearness allowance (DA) reached 50 percent. However, it is not necessary that every government employee gets this full amount.

How is the calculation of gratuity?

The calculation of gratuity is done on the basis of a particular formula. According to the rule, the employee gets 16.5 times or 25 lakh rupees of his last salary (basic pay + dearness allowance), whatever is low, in the form of gratuity. This means that not every employee will get 25 lakh rupees, but gratuity will be fixed on the basis of their service period and salary.

Gratuity types

Government employees get two types of gratuity – retirement gratuity and death gratuity.

Retirement gratuity

A quarter of basic pay + dearness allowance is added for every 6 months of service.

A maximum of 16.5 times salary or 25 lakh rupees, whichever is less, will be given.

At least 5 years of service is mandatory to get gratuity.

Decath gratuity

If the employee dies during service, then his family will get gratuity according to this formula-

Service less than 1 year: 2 times the salary

1 to 5 years: 6 times the salary

5 to 11 years: 12 times the salary

11 to 20 years: 20 times the salary

More than 20 years: half salary for every 6 months

Will there be gratuity under Unified Pension Scheme (UPS)?

The central government is going to launch a new pension scheme, ‘Unified Pension Scheme (UPS)’ from April 1, 2025. The scheme combines the characteristics of Old Pension Scheme (OPS) and National Pension System (NPS). In this, a minimum pension of Rs 10,000 will be given to employees with at least 10 years and a fixed pension will be given to those who complete the entire service period.

Recently, the government was asked in Parliament whether gratuity would be received under Unified Pension Scheme (UPS), as is found in Old Pension Scheme (OPS) and New Pension Scheme (NPS). The Finance Ministry replied that there is an option under UPS, NPS, and “Gratuity will be given as per Central Civil Services (Payment of Gratuity under the National Pension System) Rules, 2021.”

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