Will Your in-Hand Salary Reduce Under New Labour Codes? Govt Clarification

The labour ministry has sought to ease the growing anxiety among salaried employees. Clarifying that the new Labour Codes will not lower their take-home salary as long as provident fund (PF) contributions remain based on the current statutory wage cap of Rs 15,000. 

In a post on X, the ministry said, “The new Labour Codes do not reduce take-home pay if PF deduction is on statutory wage ceiling. PF deductions remain based on the wage ceiling of ₹15,000, and contributions beyond this limit are voluntary, not mandatory.”

What Does it Mean? 

Employees who presently contribute Rs 18,00 to their PF, 12% of the Rs 15,000 statutory wage cap, will see no impact on their take-home income. Employees earning a basic salary below Rs 15,000 might experience a minor increase in PF deductions if their basic pay rises, but only until it reaches the Rs 15,000 threshold. Any contribution above this limit remains entirely voluntary and is not required under the new labour codes. 

How PF Deduction Works Under New Labour Codes? 

If your monthly salary is Rs 60,000, with Rs 20,000 as Basic + DA and Rs 40,000 as allowances, your PF was earlier calculated on the Rs 15,000 wage ceiling. This meant both you and your employer contributed Rs 18,00 each, leaving your take-home pay at Rs 56,400. 

Under the revised rules, since allowances make up more than 50% of the salary, Rs 10,000 is added back to the wage component for calculation purposes, taking the notional wage to Rs 30,000. However, PF continues to be calculated only on the statutory limit of Rs 15,000. As a result, both contributions remain Rs 1,800, and your take-home salary stays unchanged at Rs 56,400.