Your CTC structure likely to be overhauled as govt set to implement new wages code

On February 8, Labour Secretary Apurva Chandra in a media briefing said that he Ministry of Labour and Employment is likely to complete the process to finalise the rules under the four labour codes paving the way for making reforms are reality soon.

New Delhi: 7th pay commission latest update --The new Wage Code, once implemented (expectedly in April this year) may bring a host of changes in the employees' pay structure that includes its take home pay, PF and Gratuity component.

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. This is based on the grounds that the new wage code mentions provision entailing that the employee's basic salary will be at least 50 percent of his/her net monthly CTC. Hence, if this provision comes into effect, it will mean that employees will not be able to get more than 50 percent of his/her net monthly salary in form of allowance.

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.

The Ministry of Labour and Employment has finalised rules under the four labour codes paving the way for making reforms a reality by notifying those for implementation soon. The four broad codes on wages, industrial relations, social security and occupational safety, health & working conditions (OSH) have already been notified after getting the President's assent. But for implementing these four codes, the rules need to be notified.

Parliament had passed four codes on four broad codes on wages, industrial relations, social security and occupational safety health & working conditions (OSH) which would ultimately rationalise 44 central labour laws.

The Code on Wages was passed by Parliament in 2019 while the three other codes got clearance from both the Houses in 2020. The ministry wants to implement all four codes in one go. After firming up of rules, now four codes can be notified in one go.