Under the code of wages passed by the parliament in the year 2019, the new wage rule states that a company cannot practice salary structure with basic salary more the 50 percent of the total salary per month.
The new rule is set to be applied from April 1st, 2021. Companies with not an equal ratio of allowances and basic salary need to revise their pay policies.
This is in accordance with increasing PF and gratuity amount in beneficial with employees retiring. This will gradually reduce the take home salary for employees. The allowance parameters need to be lesser or equal to 50 percent of total monthly pay.
This, in turn, increases employee’s contribution to their PF account. Many companies prefer setting allowance part higher, which allows employee to take major part of salary home and less PF contribution of employer and employee. This new rule will force both parties to have a better cut for PF and gratuity amount will rise.
Read also – All you need to know about PF (Provident Fund)
Highlights of New Wage Rule-
- Revision of wages at most companies.
- Allowances to be reduced for employees.
- The basic salary has to be minimum 50 percent of total salary.
- Gratuity payments will increase for retirees.
- Better PF contributions.
Companies will experience higher employee costs like PF contributions and less allowances.
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Source: Hindustan Times, India TV news, NDTV India, The New Indian Express