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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