The government has brought in new labour rules that say companies may now have to keep at least half of an employee’s CTC as basic salary. Because of this change many companies may need to reorganise how they pay their staff. For several employees the money they take home each month may slowly reduce as more money will go into their retirement savings. To make labour rules simpler the government has combined 29 older laws into four major Labour Codes: Code on Wages (2019) Industrial Relations Code (2020) Code on Social Security (2020) Occupational Safety Health and Working Conditions Code (2020) These Codes have started from November 21 2025. The aim is to make compliance easier for companies improve worker protection and update India’s labour system for today’s needs. Since PF and gratuity are calculated based on basic salary a higher basic pay will lead to more PF and gratuity contributions from both the worker and the employer. This will help employees save more for retirement but it also means less take-home pay because these deductions will still come from the same CTC amount. The Code on Wages has already become active from Friday and the detailed rules will be announced in the next 45 days. After this companies must change their salary structures accordingly. The rule on basic salary has been added to stop companies from keeping the basic pay very low on purpose and increasing allowances which helped them reduce their share of PF and gratuity earlier. Till now most companies kept the basic salary very low compared to the total CTC and paid the rest as different allowances. PF money is taken from the basic salary i.e. 12 per cent from the employee and 12 per cent from the employer. So when the basic pay was low the PF cut was also small which meant employees got more money in hand every month. Gratuity is also calculated using basic pay so a lower basic salary reduced that amount too. What changes under the New Labour Code The new labour rules bring in a single clear meaning of “wages.” This will now include basic salary dearness allowance and retaining allowance. Under the new system at least half of a person’s total pay must be counted as wages for legal calculations. Because of this the amount used to calculate PF and gratuity will become higher. According to a report by India Today lawyer Alay Razvi explained that this new definition will change how retirement benefits and other legal payments are worked out. Razvi also said that companies do not have to raise the basic salary they give to employees. The main difference is in the wage figure that will be used to calculate PF and gratuity. India Today reported that this calculation base will increase for most workers including people hired on fixed-term contracts. Impact on take-home pay Razvi told India Today that since the amount used to calculate PF will increase the deductions will also rise. However how much the salary structure actually changes will depend on how each company decides to apply the new rules. He also said that take-home pay may go down if employers increase deductions without raising the overall salary. Reports in the Economic Times say that the new wage definition could help employees build stronger retirement savings because PF and gratuity amounts will be higher. But at the same time monthly take-home pay may become lower if companies reduce allowances to balance their higher contribution costs.