Workforce · Free calculator
What the new labour codes do to a salary: wages under the 50% rule, provident fund, gratuity and take-home pay, before and after 21 November 2025.
Quick Statutory Answer
Under the labour codes in force since 21 November 2025, "wages" means basic pay, dearness allowance and retaining allowance — but if the excluded allowances (HRA, conveyance, special allowance and the rest) come to more than half of total pay, the excess counts as wages. So wages are never less than 50% of total remuneration. Wages drive gratuity (15/26 of monthly wages for each year of service) and provident fund (12% from each side on wages up to ₹15,000 a month, unless the employer contributes on full wages). Where basic pay was below half of gross, the employer's gratuity liability rises, and PF rises too wherever the old basic was under the ₹15,000 ceiling.
| Total Monthly Pay | Basic + DA (Old) | Wages Under the Code | Employee PF (Old → New) | Monthly Gratuity Provision (Old → New) |
|---|---|---|---|---|
| ₹30,000 | ₹12,000 | ₹15,000 | ₹1,440 → ₹1,800 | ₹577 → ₹721 |
| ₹60,000 | ₹24,000 | ₹30,000 | ₹1,800 → ₹1,800 | ₹1,154 → ₹1,442 |
| ₹1,00,000 | ₹30,000 | ₹50,000 | ₹1,800 → ₹1,800 | ₹1,442 → ₹2,404 |
On a total monthly pay of ₹30,000 with basic and DA of ₹12,000, wages under the labour codes rise to ₹15,000, because allowances above half of total pay now count as wages. Employee PF on the ₹15,000 ceiling goes from ₹1,440 to ₹1,800 a month, and the monthly gratuity provision from ₹577 to ₹721. On ₹60,000 with ₹24,000 basic, wages rise to ₹30,000, but PF is unchanged at ₹1,800 because basic was already above the ceiling; only the gratuity provision moves, from ₹1,154 to ₹1,442.
Section 2(88) of the Code on Social Security, 2020 and section 2(y) of the Code on Wages, 2019 define wages as basic pay, dearness allowance and retaining allowance, and exclude items such as HRA, conveyance, overtime and commission. If the excluded items together exceed half of total remuneration, the excess is treated as wages. In practice wages can no longer be less than 50% of total pay.
Only where the employee's PF contribution rises. PF is 12% of wages up to ₹15,000 a month for most employers, so an employee whose basic pay was already ₹15,000 or more sees no change in PF or take-home. An employee on a low basic with high allowances, or one whose employer contributes on full wages, pays more PF and takes home less, though the money goes into their PF account.
Yes, wherever basic pay was below half of total pay. Gratuity is fifteen days of wages per year of service on a twenty-six day month, and wages now include the excess over half of total pay. The Labour Ministry's FAQ says gratuity falling due after 21 November 2025 is computed on the revised wages last drawn at exit.
On 21 November 2025, when the four labour codes came into force. The Labour Ministry's FAQ of 16 March 2026 confirms that the revised definition of wages applies from that date.
The employer bears its own 12% PF share and the gratuity liability; the employee bears their 12% PF share. If an employer holds cost-to-company fixed, its extra contributions come out of gross pay, which lowers take-home further. That is a choice about how the package is structured, not something the codes require.
Maintains the law explainers, calculators, templates and blog posts on vidhisar.in: checks them against the statute text and updates them when the law changes. Errors and changes in the law can be reported to legal@vidhisar.in.