If your CTC (Cost to Company) is between ₹7 lakh and ₹15 lakh, this news is very important for you. The new Labor Code, notified on November 21, 2025, has made a major change to the salary structure of employees. While this initiative by the central government will strengthen the foundation for future security for employees, such as gratuity and pension, it may also reduce the monthly "in-hand" salary, or net take-home pay. Simply put, your total salary (gross salary) will remain unchanged, but the calculation of how money is deposited into your bank account will definitely change.

Experts say that the new rules primarily address the definition of "wages." The government has clarified that 'wages', consisting of basic pay, dearness allowance (DA), and retaining allowance, must now constitute at least 50% of total compensation. If your company previously kept these components below 50%, it will now have to immediately revise its salary structure. This change will directly impact the calculation of your PF and gratuity.

Why might your monthly salary decrease?
Under the old system, companies often kept the allowances component of salary higher and the basic salary lower, to reduce the burden on PF and gratuity. However, under the new code, if your allowances (such as HRA, special allowances, etc.) exceed 50% of your total salary, any amount exceeding the 50% limit will be added to 'wages'.

According to Deloitte India Partners Divya Baweja and Saumya Kumar (Partner, Cyril Amarchand Mangaldas), this increase in the wage base will increase the contribution amount for PF and other social security schemes (ESI, Maternity Benefit). Since this increased amount will be deducted from your CTC, your net take-home salary will decrease.

For example, an employee whose CTC is ₹7 lakh and his basic salary is currently 40% (₹2,80,000). If the company increases it to 50% (₹3,50,000) under the new rules, see how the change will occur.

Details Old (40% Basic) New (50% Basic)
Basic Salary ₹2,80,000 ₹3,50,000
PF Contribution (@12%) ₹33,600 ₹42,000
Gratuity (@4.81%) ₹13,468 ₹16,835
Take-Home Salary ₹6,52,932 ₹6,41,165

Even with a CTC of ₹7 lakh, your annual take-home salary is decreasing by ₹11,767. Similarly, an employee with a CTC of ₹15 lakh will also see a difference in their monthly salary.

Retirement Savings Will Be Strong
Even though your monthly salary may decrease slightly, this change will bring significant relief to you in the long run. Gratuity will now be calculated on a higher wage basis, meaning you'll receive a higher gratuity at the time of leaving or retiring.

According to Deloitte's analysis, for an employee with a CTC of ₹10 lakh, the total gratuity amount could increase from ₹1,34,610 to ₹2,41,460, representing an increase of approximately 80%. Furthermore, higher PF contributions will also result in a larger retirement corpus.

According to Vinay Joy, Partner at Khaitan & Co., gratuity payments are not deducted monthly, so they don't directly impact your monthly salary. This is a significant change only for employees earning less than ₹15,000, as the maximum PF contribution limit for higher-paid employees is already capped.

There will be a major change in the salary structure. It is important to understand that the new code will not increase the employer's CTC or total expenses. The total CTC will remain the same; only the internal allocation of its components will change. Experts Alloy Rajvi (Managing Partner, Accord Juris) and Divya Baweja believe that simply increasing the basic salary by 50% will not suffice. Companies must ensure that the allowance component does not exceed 50% of the total salary at any cost. If allowances exceed 50%, the difference will be mandatory to be added to wages for calculating PF, gratuity, and social security benefits. To comply with this rule, all companies will soon have to review their compensation structures.

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