Govt Defers New Wage Code, Your Take Home Salary Will Remain Same

New Delhi: In a major relaxation for salaried employees, the Centre on Wednesday announced that the new wage code affecting take-home salary, which was expected to reduce from April 1, will remain the same until a further decision is taken in the matter. The government has deferred the decision due to pending changes in the labour codes of some states. Also Read – Explained: New Wage Bill and How It Is Likely to Impact Your Salary Takeaway

A senior official of the Labour Ministry told The Economic Times that the decision to implement the new wage code has been deferred. Along with this, three other codes – social security, industrial relations, and occupational safety, health and working conditions – have also been deferred from the earlier set deadline of April 1. Also Read – Explained: 5 Income Tax Rules That Are Changing From April 1, 2021 | Watch Video

Let’s take a closer look at the new Wage Code:

  1. The government had announced last year that the take-home salary may reduce from next financial year as companies are gearing to restructure pay packages in line with the government’s plan to churn a new wage rule.
  2. As per the new rules, set to be effective from April 2021, the allowance component of the total CTC (Cost to Company) will not exceed 50 per cent. This means that companies will have to allocate 50 per cent to the basic salary.
  3. Meanwhile, there will also be a consequent rise in gratuity and provident fund (PF) contributions of the employee, however, turning into a proportional reduction in the employee’s take-home salary.
  4. Experts said that although the take-home salary may reduce, the new rules will provide better social security and retirement benefits for the employee.
  5. At present, most private companies have a higher allowance component rather than the basic salary. Hence, if implemented, the new wage code is expected to affect private employees the most.

Also Read – Here’s Why Your Take-home Salary is Expected to go Down From April 2021 | EXPLAINED

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