New wage code in India to change salary structures

Employees, especially those with high allowances, are likely to see a major change in their salary structures if the new wage code kicks in from April 1.
By: | March 17, 2021

Under the new regulations, employees’ allowances cannot exceed 50% of their total salaries. This will mean salary structures will be subject to compulsory changes according to the government’s notification on Code on Wages 2019. 

This will affect those with basic salaries of less than 50% who will likely see a pay cut in their take-home pay. The new rules will likely affect the salary structures of high-paid employees with a high-allowance component.  

Others whose basic salaries constitute 50% or more will not be affected. 

Consequently, the new wage code may significantly increase contributions to provident fund (PF) and gratuity for some as contributions to PF are calculated based on basic salaries.  

Employers could also see a rise in costs because as employees’ contributions to PF and gratuity increases, the former’s contribution towards these would rise proportionately. 

Changes are also afoot in working hours for employees, with the maximum working hours in offices increasing to 12 hours per day. 

In addition, under the new law, 15-30 minutes of extra work done would qualify as overtime. Currently, less than 30 minutes of extra work is not considered overtime. 

READ: India’s unemployment rate back to pre-lockdown level in February

Also, the new regulations mandate that employees be given a break of half an hour after every five hours of work. 

Parliament had passed four codes on four broad codes on wages, industrial relations, social security and occupational safety, health & working conditions which would ultimately rationalise 44 central labour laws, according to ZeeNews.