India’s new labour codes have changed how salaries are structured. Under the revised rules, at least50% of an employee’s total CTC must be treated as Basic salary. This automatically increasesProvident Fund (PF), gratuity, and other statutory contributions, which reduces monthly take-home pay but boosts long-term savings.
Earlier, companies used allowances to keep Basic salary low, which meant smaller PF and retirement benefits. The new rules close this gap and ensure that retirement savings grow in proportion to actual income. This shift is designed to improvefinancial security, pensions, and social protection, bringing India closer to global standards.
Employees feel the impact immediately. A lower take-home salary affectsEMIs, household budgets, and daily spending, making the reform feel painful in the short term. But over time,higher PF and gratuity create a much larger retirement corpus, offering stability during job loss, health emergencies, or old age.
For companies, this reform meansredesigning salary structures, updating payroll systems, and ensuring compliance with the new wage definition. But the bigger challenge is not technical—it is emotional and psychological.
If employees don’t understand why their salary changed, they may assumecost-cutting or unfair treatment, hurting morale and trust.
Smart organisations should:
Show PF and retirement projectionsso employees see the long-term benefit
Explain the law clearlywith real examples
Hold town halls and Q&A sessions
Strengthen non-cash benefitslike flexibility, wellbeing, and career growth
Train managersto answer concerns with empathy
Offer financial educationon compounding, PF, and tax benefits
When employees understand that this isstructured saving, not salary loss, acceptance improves.
The new labour code is not just about deductions—it is aboutlong-term financial security. Companies that handle this change withclarity, honesty, and carewill strengthen trust and employee engagement instead of losing it.
