New Delhi: The Union Labour Ministry has clarified that the new labour codes will not reduce the in-hand salary of most employees, addressing concerns that had spread among salaried workers since the rules were notified last month.
In a statement shared onthe social media platform X, the ministry said that provident fund (PF) deductions will continue to be calculated on the statutory wage ceiling of ₹15,000, as per existing rules. Any PF contribution on wages above this limit will remain voluntary, not compulsory.
Why Employees were worried
After the Labour Codes were notified on November 21, 2025, many employees feared that their monthly take-home pay would drop. This concern arose because the new rules require basic pay and related components to form at least 50% of total wages.
Many assumed that a higher basic salary would automatically lead to higher PF deductions, reducing the amount received every month.
What the ministry says
The labour ministry said this assumption is incorrect. Even if basic pay increases due to the new wage definition, PF contributions will still be capped at ₹15,000, unless both the employer and employee choose to contribute on a higher amount.
For most salaried workers, PF deductions are already capped at this limit. Therefore, their monthly deductions and take-home salary will remain the same.
An example explained
To make things clear, the ministry shared an illustration.
If an employee earns ₹60,000 per month, with:
-
Basic pay and dearness allowance of ₹20,000
-
Allowances of ₹40,000
PF will still be calculated on ₹15,000, not on the full basic pay.
As a result:
-
Employer PF contribution: ₹1,800
-
Employee PF contribution: ₹1,800
-
Take-home salary remains ₹56,400, both before and after the new codes.
Allowances capped, but PF unchanged
Under the new Labour Codes, allowances cannot exceed 50% of total wages. If they do, the excess amount must be added back to wages for statutory purposes. However, even in such cases, PF deductions do not automatically increase, as they remain linked to the ₹15,000 ceiling.
When salary could reduce
The ministry clarified that take-home pay would fall only if an employee and employer jointly decide to calculate PF contributions on a salary higher than ₹15,000. This option exists to boost retirement savings but is entirely voluntary.
Purpose of the new rules
Officials stressed that the goal of the Labour Codes is to bring uniformity, transparency, and clarity in wage structures across organisations — not to cut employee salaries.
Employees, the ministry added, should not expect any automatic change in their monthly income simply because the new Labour Codes are coming into force.