Reduced In-Hand Salary And Increased PF Contribution Likely Under New Wage Code

New labor law: How will you in-hand salary, PF contribution change from July 1

The in-hand salary, contribution to Employees’ Provident Fund and working hours could change significantly as the Center plans to implement new labor laws from July 1.

The newly prescribed wage codes lay down a series of modifications, which will result in increased work hours, PF contributions, and decreased in-hand salary for the employees.

The government is in the process of implementing the new labor codes with effect from July 1.

However, a few states are yet to frame the rules under all four labor codes. Only 23 states and Union Territories (UTs) have published the draft rules under the Code on Wages, Minister of State for Labor and Employment Rameshwar Teli had said in a written reply to the Lok Sabha.

As per the new laws, the companies can increase the working hours from 8-9 hours a day to 12 hours.

However, they will have to offer the employees three weekly offs.

So, the working days in a week will be reduced to four days but total working hours in a week will not be affected. The new wage code mandates total working hours of 48 per week.

The employees’ take-home salary will also change significantly as the basic salary will be at least 50 per cent of the gross monthly salary under the new wage code. This will also increase the PF contributions made by employees and employers.

The in-hand salary is going to be affected more for the employees in the private sector.

Under the new labor laws, the retirement corpus and gratuity amount will increase.

The four labor codes — wages, social security, industrial relations, occupational safety, health and working conditions — were created by subsuming 29 Central labor laws.

The parliament has passed the codes, but as labor is a subject in the Concurrent List of the Constitution, the states need to notify the rules under the new codes.

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