New Delhi: April marks the first month of the new financial year, bringing with it fresh hopes and renewed energy. Did you know that, following the implementation of new labour regulations, the impact is now becoming visible on the salaries of lakhs of employees? With the new labour rules coming into effect, the impact will be evident on both employees’ ‘in-hand’ salaries and their future savings.
The Central Government has implemented a ‘Uniform Wage’ rule. According to this regulation, it is now mandatory for the sum of Basic Salary, Dearness Allowance (DA), and Retaining Allowance to constitute the base of the total salary—specifically, 5 per cent of the total compensation. Previously, many companies used to keep the Basic Salary component low.
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They would provide the remainder of the compensation to employees in the form of various allowances. However, this practice will no longer be permissible. The consequence of this change will be that your Basic Salary component will increase significantly. As the Basic Salary rises, both your and the company’s contributions to the EPFO’s EPF (Employees’ Provident Fund) will also increase substantially. This will serve to strengthen your retirement savings.
What happens if your annual CTC is ₹30 Lakhs?
For instance, if an employee’s annual CTC (Cost to Company) is ₹30 lakhs, this change will be clearly reflected in their monthly salary structure. Specifically, while the Basic Salary previously stood at approximately ₹69,444, it will now rise to ₹1,04,167. Consequently, the ‘Special Allowance’ component will decrease. Following this adjustment, the EPF deduction will increase from ₹8,333 to ₹12,500.
This means that approximately ₹4,167 more will be deposited into your PF account every month. This is the reason why your ‘in-hand’ salary—the actual cash received—will decrease. Previously, employees received ₹1,91,467; now, this figure will drop to approximately ₹1,87,300. Consequently, you will receive about ₹4,167 less in hand each month. For a CTC of ₹10 lakhs, this same deduction could range from ₹800 to ₹1,200.
Is this a loss or a gain for employees?
For any employee, a reduction in their ‘in-hand’ salary might initially feel like a financial loss. However, after some time, you may come to view this as a beneficial arrangement. Higher PF contributions will boost your retirement savings. Over the course of a year, approximately ₹1 lakh in additional funds will be deposited into your PF account. Furthermore, benefits such as gratuity will also increase, as they are based on your basic salary.
