NewDelhi: Since the new labour codes were announced in November, many employees have expressed concerns that their take-home pay may fall as the basic salary rises to 50 percent of CTC and allowances are reduced. However, according to a recent update from the labour ministry employees whose Provident Fund deductions are based on the statutory wage ceiling of Rs 15,000 will not have a reduction in their take-home salary. The labour ministry particularly refers to employees who contribute Rs 1,800 per month to their PF which is 12 percent of Rs 15,000.
The Labour Ministry said in a post on X on Wednesday that the new Labour Codes will not lower take-home pay if PF deduction is on the statutory wage cap. “The new Labour Codes do not reduce take-home pay if PF deduction is on the statutory wage ceiling. PF deductions remain based on the wage ceiling of Rs 15,000, and contributions beyond this limit are voluntary, not mandatory,” the Labour Ministry said in a social media post on X.
Employees with a basic salary of less than Rs 15,000 may see their EPF deduction increase if their revised wage according to the new labour codes is higher than their previous basic salaries. However, this increase will only be applicable till the revised wage reaches Rs 15,000. Other employees are not required to make a higher EPF deduction under the new labour codes even if their revised wage which is calculated as 50 percent of CTC exceeds Rs 15,000 and their old basic salary.
The Labour Ministry has provided an illustration of how someone earning a total monthly salary of Rs 60,000 where basic+DA is Rs 20,000 and allowances are Rs 40,000 will have the same take-home pay under both the new and the old labour codes, assuming an EPF contribution of Rs 1,800.
Under the labour codes, if allowances exceed 50 percent of total pay, the excess must be added back to ‘wages’ for statutory deductions. Because allowances here are two-thirds of the income, Rs 10,000 is added back to wages bringing the PF-calculation wage from Rs 20,000 to Rs 30,000.
Even if the wage is recalculated, PF is still based on the Rs 15,000 statutory wage limit. So PF contributions remain the same at Rs 1,800 per person which is 12 percent of Rs 15,000 as before. So, the take-home salary remains unchanged in both cases at Rs 56,400.
Therefore, if your basic salary is less than Rs 15,000, and your revised wage under the new Labour Codes goes up, your PF contribution may rise but only up to the Rs 15,000 limit. So, if your new wage exceeds that cap, you will not be required to pay more PF.
Bureau Report
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