The impact of new wage code for salaried employees from 1 April 2021.

The new wage-code has merged below 7 Acts, namely, Minimum wages Payment of wages Bonus Act industrial relations Social security Occupational Health Safety From the above change, employees can expect changes in their Salary-slip with new definition of Wages, which includes, basic Salary, DA, other allowance (except Bonus, Pf, pension, gratuity etc).

Salary-slip: In pay-slip, currently basic salary structure is: 25 to 40% on the CTC is basic salary, however from 1-4-2021 onwards, basic pay is 50% on the CTC, the remaining 50% of CTC would be HRA, conveyance etc., this change will make higher savings in PF & Gratuity and inversely in-hand salary will become dearer.

Example: For simplicity’s sake, let us consider an employee earning a salary of Rs 20000/pm with a Basic of Rs 8000 while the remaining is covered by allowances before 1-4-2021. In this case, the employee’s PF contribution would be at 12% Basic pay i.e. 960. but from 1st April; the basic pay would rise to Rs 10000. Allowances would have a reduced share of Rs 10000. But employee’s PF contribution, in this case, shall rise from 960 to 1200.

Gratuity: At present, employee who works in a company for 5 years would be eligible. Now, it will be eligible for 1 year also. All must impliment this w.e.f 1-04-2021.