Addressing this biggest concern of millions of employees, the Union Ministry of Labor and Employment has clarified that there will be no reduction in employees’ take-home salaries even after the implementation of the new Labor Code. This assurance is based on the condition that Provident Fund (PF) deductions will be limited to the statutory limit of ₹15,000. This government clarification provides significant relief to employees while bringing transparency to the salary structure.

Deductions above ₹15,000 are optional

The Ministry has clarified that companies cannot force employees to make PF deductions exceeding ₹15,000. This simply means that your 12% PF contribution is mandatory only up to ₹15,000. PF contributions above that limit are entirely at your discretion. This clearly indicates that companies cannot arbitrarily reduce employees’ in-hand salaries.

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What changes have been made in the new labour codes?

The government implemented all four new labour codes on November 21, 2025. The most significant change is the introduction of a new Uniform Definition of Wages, based on which PF, gratuity, and ESI will be calculated. This change will require companies to restructure their employees’ CTC structure, but it will not negatively impact their in-hand salaries.

The Ministry emphasized that the new PF system does not reduce take-home pay. PF will be charged only on the prescribed salary limit of ₹15,000. This statement has eliminated confusion among employees.

No Impact on Salary

Suppose your total salary is ₹60,000, of which basic + DA is ₹20,000 and allowances are ₹40,000.

Under the old rules:

PF was charged only on ₹15,000.

Employee PF: ₹1,800

Employer PF: ₹1,800

In-hand salary: ₹56,400

Under the new labour code:

If allowances exceed the basic salary, ₹10,000 will be added to the calculation.

But PF will still be charged only on ₹15,000.

Employee PF: ₹1,800

Employer PF: ₹1,800

In-hand salary: ₹56,400 (remains the same).

This means there will be no impact on the employee’s pocket.

What does this mean for employees

The biggest benefit to employees following this clarification from the Ministry is that they will no longer have to worry about their monthly income. In short, the results are:

In-hand salaries will not decrease; they will remain stable.

Employers cannot forcibly impose significant cuts on employees.

The CTC structure will change, but the basic salary will remain protected.

There will be greater transparency in the calculation of PF, gratuity, and ESI.

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