Your take-home salary may reduce in April 2021

As per the new compensation rules, which are part of the Code on Wages 2019, allowance component cannot exceed 50 per cent of the total salary or compensation. 

If you thought 2020 was terrible, wait till April 2021. That's when a new wage code comes into force, which could reduce your take-home salary.   As per the new compensation rules, which are part of the Code on Wages 2019, allowance component cannot exceed 50 per cent of the total salary or compensation.    To ensure compliance, employers will have to increase basic pay component of salaries that will see in a proportional rise in gratuity payments and employees' contribution to the provident fund.

If you thought 2020 was terrible, wait till April 2021. That's when a new wage code comes into force, which could reduce your take-home salary.

As per the new compensation rules, which are part of the Code on Wages 2019, allowance component cannot exceed 50 per cent of the total salary or compensation. 

To ensure compliance, employers will have to increase basic pay component of salaries that will see in a proportional rise in gratuity payments and employees' contribution to the provident fund.

Hence, employees' take-home salary will dip. At the same time, the employees' retirement corpus will see a substantial increase.   With most companies opting to keep the allowance component of the pay package higher, the new law means the cost incurred by them will also increase with regard to contribution towards employees' PF and gratuity.   The Code on Wages Bill, 2019 seeks to amend and consolidate laws relating to wages, bonus and matters connected therewith. It was passed in Rajya Sabha on August 2, 2019. Lok Sabha passed the bill on July 30, 2019.

Hence, employees' take-home salary will dip. At the same time, the employees' retirement corpus will see a substantial increase.

With most companies opting to keep the allowance component of the pay package higher, the new law means the cost incurred by them will also increase with regard to contribution towards employees' PF and gratuity.

The Code on Wages Bill, 2019 seeks to amend and consolidate laws relating to wages, bonus and matters connected therewith. It was passed in Rajya Sabha on August 2, 2019. Lok Sabha passed the bill on July 30, 2019.