PF Rules: The government implemented new labor codes as part of major reforms to labor laws. The new labor codes were long awaited. Parliament had passed them long ago. Experts say that the four new labor codes, which came into effect on November 21st, have made significant changes to suit current needs. These changes have significantly benefited employees, particularly gig workers, who have been included within their scope.
Major change in gratuity rules
With the implementation of the Code on Social Security, 2020, many old rules like Gratuity Act, Employees State Insurance Act have ceased to exist. Fixed term employees will benefit a lot from the new gratuity rules. Earlier, the benefit of gratuity was available after completing at least 5 years of service. Now, fixed term employees will get the benefit of gratuity after completing one year of service. Fixed term employees mean those employees who are appointed by the company for a fixed term i.e. for a fixed period of time. This period can be 2 years, 3 years or more.
Basic salary at least 50% of CTC
The implementation of the Code on Wages, 2019, will change the salary structure of employees. It states that an employee’s basic salary should be at least 50% of their cost-to-company (CTC). Previously, companies used to set lower basic salaries, resulting in higher take-home pay for employees. This is because PF deductions are based on basic salary. 12% of an employee’s basic salary is deposited into their PF account every month.
The EPF Act, 1952 will continue to exist.
Experts say that since the implementation of the new labor codes, most rules have changed, including workers’ salaries and social security. However, the PF rules have remained unchanged. It was previously believed that the EPF Act, 1952, would cease to exist with the implementation of the new labor codes. It was expected that the PF rules would also be incorporated into the Social Security Code. However, the government has not issued a notification regarding this. This means that the old PF rules will remain in place alongside the new labor codes.
There may be a problem in changing the salary structure
Due to the old PF rules remaining in place, employers may face difficulty in making changes in the salary structure as per the new labour codes. Experts say that the government may implement new PF rules in future. This will make it easier for employers to make changes in the salary structure. According to the new rules, C2C should be at least 50 per cent of the basic salary. This means that the employers will now have to adjust components like HRA, LTA in the remaining 50 per cent. This will impact the amount of HRA and LTA. The amount of LTA of the employees may reduce.