7th Pay Commission latest update: Here's why your take-home pay may reduce from April 2021 but Gratuity, PF component may rise

A couple of months ago, the government notified draft rules under Code on Wages 2019, following which take-home pay of employees may be reduced from next financial year ie, April 2021 because the draft rule required companies to restructure their salary break up. This also means that there will be a consequent rise in gratuity and PF contribution of the employee.

New Delhi: As millions of salaried individuals are eagerly waiting for Finance Minister Nirmala Sitharaman's Union Budget 2021 announcement, the government's notification on Code on Wages 2019 may reduce the take-home pay of employees next financial year ie, April 2021 while components like PF and Gratuity might rise.

A couple of months ago, the government notified draft rules under Code on Wages 2019, following which take-home pay of employees may be reduced from next financial year ie, April 2021 because the draft rule required companies to restructure their salary break up.

The draft rules mention that employees' allowance component cannot exceed 50 percent of the total pay package, resulting which, companies or employers will have to allocate 50 percent of the salary to basic salary component. This also means that there will be a consequent rise in gratuity and PF contribution of the employee.

Hence, while the take home pay of the employees may be reduced, the Gratuity and PF component may rise.

In a related news, the Union Ministry of Labour and Employment had on November 13 notified the draft rules under the Code on Social Security, 2020 inviting suggestions from the stakeholders within a period of 45 days from the date of notification of the draft rules.

The draft rules provide for operationalization of provisions in the Code on Social Security, 2020 relating to Employees’ Provident Fund, Employees’ State Insurance Corporation, Gratuity, Maternity Benefit, Social Security and Cess in respect of Building and Other Construction Workers, Social Security for Unorganised Workers, Gig Workers and Platform Workers.

The draft rules also provide for Aadhaar based registration including self-registration by unorganised workers, gig workers and platform workers on the portal of the Central Government. Ministry of Labour and Employment has already initiated action for development of such portal. For availing any benefit under any of the social security schemes framed under the Code, an unorganised worker or a gig worker or platform worker shall be required to be registered on the portal with details as may be specified in the scheme.