Government preparing to implement labor codes, in-hand salary of employees will decrease, PF will increase

All four labor codes are likely to be implemented in the coming few months. The central government is preparing to implement these labor codes. The implementation of these codes will reduce the in-hand pay of employees. Also, companies will have to contribute more to the PF fund of the employees. With the implementation of these laws, there will be a big change in the calculation of basic salary, allowances and PF contribution of the employees.

These 4 labor codes include the Wage/Wage Code, the Code on Industrial Relations, the Code on Work-Special Safety, the Code on Health and Work Conditions (OSH), and the Social and Occupational Safety Code. The Labor Ministry had earlier envisaged the implementation of these labor codes from the new financial year i.e. April 1, 2021. But then it was postponed, giving employers more time to restructure their employees’ salaries, according to the new wage code.

The ministry had also finalized the rules under these four codes. But these could not be implemented because many states were not in a position to implement these rules under their own codes. Explain here that labor is a concurrent subject under the Constitution of India. This means that both the Center and the states will have to notify these rules under these four codes, only then these laws will be effective in the respective states.

A source told news agency PTI, “Many major states have not finalized the rules under these four labor codes. Some states are in the process of finalizing rules for the implementation of these laws. The central government cannot always wait for the state governments to finalize these rules. In such a situation, the central government has a plan to implement these laws in a month or two, because companies will also have to give some time to adjust to the new laws.

All allowances under the new wage code cannot exceed 50 percent of the total pay. With this, the basic salary of the employee will be 50 percent of the total salary. At the same time, the PF contribution of both the employee and the company will increase. In addition, the amount of gratuity will also increase. This simply means that the employee’s savings will increase. However, the employee’s in-hand salary will decrease.