The introduction of the New Labour Codes created confusion among many salaried employees. The biggest concern was whether take-home pay would reduce because of the revised definition of wages. However, the Labour Ministry has clarified that take-home salary will remain the same for most employees as long as provident fund (PF) deductions continue to be calculated on the statutory ceiling of ₹15,000 per month.
Under the new rules, basic pay, dearness allowance, and retaining allowance must together form at least 50% of a person’s total salary package. This change was introduced to bring uniformity, as companies earlier used different salary structures, often keeping basic pay low to reduce statutory contributions such as PF and gratuity.
With the new definition, allowances cannot exceed 50% of the salary. If they do, the extra amount must be added back to wages. Many employees believed this would automatically increase PF deductions and reduce monthly take-home pay.
The government has clarified that PF does not automatically increase under the new codes. PF contributions are compulsory only up to the statutory limit of ₹15,000 per month. This means PF is calculated as 12% of ₹15,000, unless the employer and employee voluntarily choose to contribute on the full basic wage.
For example, even if the new wage structure increases statutory wages on paper, PF will still be calculated on ₹15,000 unless both parties opt for higher contributions. As a result, take-home pay remains unchanged for most workers.
Monthly take-home pay may reduce only in two situations:
Labour unions have been demanding a higher ceiling to increase long-term retirement benefits, but it has not been revised since 2014.
Read more: Will Your Take-Home Salary Drop After the 4 New Labour Codes? Explained.
The New Labour Codes do change how wages are defined, but they do not reduce take-home salary as long as PF remains capped at the ₹15,000 statutory limit. Employees will see an impact only if they voluntarily opt for higher PF contributions or if the government raises the ceiling later. For now, monthly income remains unaffected.
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Published on: Dec 11, 2025, 1:08 PM IST
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