The impact of the new Labour Code 2025 is now visible, which could significantly impact employees’ salary structures. The new government regulations now mandate that each employee’s basic salary be 50% of their total CTC. As the basic salary increases, deductions such as PF and gratuity will also increase.

All of this will impact employees’ in-hand salaries. This means their in-hand salaries will be reduced. Along with this, long-term benefits will also increase. According to the government, uniform wage definitions across the country will ensure uniform calculations for gratuity, pension, and other social security benefits.

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Companies will have to do this..s

According to the Labour Code, wages will include basic pay, dearness allowances, and returning allowances. Furthermore, if an employee’s salary in this category falls below 50% of their CTC, companies will be forced to increase it to 50%. Additionally, rules regarding bonuses and incentives may also change.

According to some experts, if a bonus or incentive is part of the employment conditions, it will be considered part of wages. However, if the bonus is given solely at the company’s discretion, i.e., a discretionary bonus, it will not be included in wages. This will allow employers to adjust their employees’ salary structures to maintain a balance in accordance with the new rules.

What will be the impact on leave payments?

Also, leave encashment (amount received instead of leave) may be affected. This is typically paid upon leaving a job. Therefore, it will be excluded from wages. However, if a company provides leave encashment annually, it will be considered part of wages. Further guidelines may also be issued by the government on this matter.

At the same time, the new labour code will have an impact on employees’ pockets. PF, gratuity, and long-term benefits will also increase. This could also reduce the salary for the following month. Companies can’t reduce an employee’s CTC, but they can try to reduce or modify bonuses, incentives, and allowances to balance expenses.