Your in-hand salary may decrease after the next few months. The central government is preparing to move forward on the implementation of several laws. After the implementation of this law, the salary (take home) in the hands of the employees will decrease, while at the same time the liability of the provident fund (PF) of the companies will increase. After the implementation of the Wage Code, there will be a significant change in the method of calculation of basic salary and provident fund of employees.
The Labor Ministry wanted to implement these four codes….industrial relations, wages, social security, occupational and health protection and working conditions from April 1, 2021. These four labor codes will harmonize 44 central labor laws. The ministry had also finalized the rules under these four codes. But these could not be implemented as many states were not in a position to notify these rules under their respective codes.
Rules may come into force very soon
A source said, “Many major states have not finalized rules under these four codes. Some states are in the process of finalizing rules for the implementation of these laws. The central government cannot always wait for the states to finalize these rules. In such a situation, the government plans to implement these laws in a month or two because companies and establishments will have to give some time to adjust with the new laws.
The source said that some states have already released the draft rules. These states include Uttar Pradesh, Bihar, Madhya Pradesh, Haryana, Odisha, Punjab, Gujarat, Karnataka and Uttarakhand.
Here are the new rules
Under the new wage code, the allowances will be capped at 50 per cent. This means that 50 percent of the total salary of the employees will be the basic salary. Provident fund is calculated on the basis of percentage of basic salary. This includes basic pay and dearness allowance.
At present, employers divide the salary into several types of allowances. This keeps the basic salary low, thereby reducing the contribution to provident fund and income tax. In the new wage code, the provident fund contribution will be fixed at the rate of 50 percent of the total salary.