The central government has now brought 4 major labour reforms in India. The new Labour Codes will reshape how salaries are structured and how social security benefits are calculated. Naturally, the biggest question for employees now is: will take-home salary go down? The answer is yes, but it depends on how employers restructure your pay.
The new Labour Codes have introduced a uniform definition of “wages”. Under this rule, basic pay, DA, and retaining allowance must form at least 50% of total earnings or CTC. Today, many companies keep basic salary low and increase allowances so that PF and gratuity contributions stay smaller. Once the new rule applies, this flexibility reduces.
Because PF and gratuity are calculated on basic salary, raising the basic component directly increases these deductions. These contributions build long-term savings but do not add to your monthly in-hand pay. As a result, employees may receive less every month even though their overall CTC remains unchanged.
To understand the change clearly, consider an employee earning ₹10 lakh per year (CTC).
Monthly impact: Your take-home salary decreases by ₹1,500 per month because your PF contribution increases.
Nothing changes in your total CTC. Only its structure does.
The new codes also introduce wider reforms. They set a national floor wage and ensure overtime at twice the normal rate. Social security coverage expands to gig and platform workers, and fixed-term employees become eligible for gratuity after 1 year. Women can now work night shifts with safety measures. However, the layoff approval threshold rises from 100 to 300 workers.
Read more: Government Brings 4 Labour Codes into Effect to ModerniseLabour Laws.
The new Labour Codes aim to create fairness and transparency in salary structures while strengthening social security. Although they increase long-term PF and gratuity savings, many employees are likely to see a dip in take-home salary because basic pay will form a larger share of CTC. The exact impact will differ across companies, but a shift toward more structured wages is now firmly underway.
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Published on: Nov 24, 2025, 12:32 PM IST
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