Wage code deferred but after implementation this will be the biggest change in your salary slip - Know all details here

In a big news for all employees, the four labour codes will not come into effect from April 1.

Under the new wages code, allowances are capped at 50 per cent. Pixabay pic.

In a big news for all employees, the four labour codes will not come into effect from April 1 as states are yet to finalise the relevant rules, which means that there will be no change in take home pay and provident fund liability of companies for now.

But, once the wages code comes into force, the biggest change in your salary slip will be the way basic pay and provident fund of employees are calculated.

Allowances capped at 50 pc

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-Under the new wages code, allowances are capped at 50 per cent.

- This means half of the gross pay of an employee would be basic wages.

- Provident fund contribution is calculated as a percentage of basic wage, which includes basic pay and dearness allowance.

- Employers have been splitting wages into numerous allowances to keep basic wages low to reduce provident fund and income tax outgo, as per a report in PTI.

- The new wages code provides for provident fund contribution as a prescribed proportion of 50 per cent of gross pay.

The labour ministry had envisaged implementing the four codes on industrial relations, wages, social, security and occupational health safety & working conditions from April 1, 2021. The ministry had even finalised the rules under the four codes.

However, on the last day of the financial year 2021 and on the eve of its implementation (April 1), government announced it will not be implementing the new Wage Code just yet.

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