The labour ministry has finalised rules under the four labour codes, or laws, and is likely to notify them to take effect from April. The country’s most wide-ranging labour reforms in decades will have an impact on both employers’ outgo and employees’ take-home salaries.
Once implemented, the codes will prompt companies to restructure employee compensation packages or “cost to company” (CTC). Firms have will have to restructure salaries because, under the new rules, all allowances, such as leave travel, house rent, overtime and conveyance, have to be capped at 50% of the CTC. The Code on Wages 2019 has revised the definition of ‘wages’ which will now include three components: basic pay, (inflation-linked) dearness allowance and retention payment.
According to the new definition, “wage” will exclude statutory bonus, pension and PF contribution, conveyance allowance, HRA, overtime and gratuity. If any of these exclusions, in aggregate, are in excess of 50% of an employee’s CTC , barring special allowance, the excess amount will be added back to the wage for calculation of social security benefits.
Source: The Hindustan Times
