Take-Home Salary, PF, Working Hours to be Changed Soon: How New Labour Code Will Impact You

The four new labour codes under an amended labour laws are reportedly ready to be implemented, with several states filing their draft rules. Under the new labour codes, the employee-employer relationship is set to witness a revamp, with the social security of workers being a priority. The central government has been working on designing the four new labour codes, under which there will be significant changes in terms of an employee’s salary, PF contributions and working hours among others. These laws, once implemented, will make organisations across the country undergo paradigm shifts.

New Labour Law: How Will Your Working Hours Change?

Under the new labour laws, one major thing that is likely to be implemented is the change in work hours. Employees will get the option to work 12 hours per week and get a three-day week off every week, depending on the organisation.

“The daily working hours have been capped at 12 and weekly working hours have been capped at 48. This will provide employers with the flexibility to opt for a 4 day work week, subject to overtime payments. While this may result in employees working fewer days in a week, they would need to work for longer hours in a day,” said Vaibhav Bhardwaj, partner at IndusLaw.

Under the new codes, you will be paid overtime wages at double your regular wages if you work beyond 48 hours per week. “The Labour codes provide for payment of overtime wages at double the regular wages for work beyond regular working hours. This requires organisations to streamline their overtime policies,” said Saraswathi Kasturirangan, partner at Deloitte India.

How Will New Labour Laws Impact Your PF Contributions and Take Home Salary?

Another major change that this is going to bring in is that the ratio of the take home salary and the employees and employer’s contribution in provident fund. As per the provision of the new codes, the basic salary of the employee will have to be 50 per cent of the gross salary. While this will mean that PF contributions of the employee and employer will increase, the take home salary will decrease for some employees.

“Employees are expected to receive better retirement benefits in the form of Gratuity. In respect of employees who PF wages is less than the statutory wage ceiling i.e Rs 15,000 pm, the PF and pension contributions would increase,” Kasturirangan told news18.com.

“Organisations may need to re-visit their compensation structure in light of the new definition of wages to assess the potential financial outlay. By way of an example, gratuity payment is currently calculated on the basic wage and dearness allowance (if any) component of salary,” Bharadwaj told news18.com.

The money received after retirement as well as the gratuity amount will also increase under the provisions of the new draft rules. “Once the new codes are implemented, gratuity will need to be calculated on the new definition of wages which will likely result in a higher gratuity payment,” he added.

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