New Delhi: With effect from April 1, 2021, your gratuity, provident fund (PF), and working hours can undergo significant changes. On one hand, gratuity and PF of employees will increase. At the same time, on the other hand, the take-home salary will be less than before. Even the balance sheet of companies will be affected. The reason for these changes is the three Wages Code Bill passed in Parliament last year. The bill is likely to come into force from 1 April this year, due to which these changes may occur.
According to the new rule, the allowance will be a maximum of 50 percent of the total salary. This means that the basic salary (basic salary and dearness allowance in government jobs) should be 50 percent or more of the total salary. It is important to note that for the first time in history after independence, the law is being changed in this way. However, the government claims that it will benefit both employers and workers.
The salary structure of most employees will change, as the non-allowance portion of the salary is usually less than 50 percent of the total salary. At the same time, the share of allowances in the total salary becomes even more. An increase in your basic salary will also increase your PF. PF is based on basic salary. An increase in basic pay will increase PF, which means that the take-home salary will be cut.
An increase in contribution to gratuity and PF will increase the amount received after retirement. This will enable the employee to live comfortably after retirement. The pay structure of high-paid employees will change and be most affected. Increasing PF and gratuity will also increase the cost of companies. Because they too have to contribute more to the PF for the employees.
“The Labor Ministry has made some suggestions to the Parliamentary Committee which, if accepted, may increase the Take Home Salary, but it may harm pensioners,” said an official. The Ministry of Labor has suggested reducing the contribution of both the employee and employer in the Employees Provident Fund (EPF) from 12 percent to 10 percent.
The new law proposes to increase the maximum working hours to 12 hours. According to the new law, work done more than 15–30 minutes will be considered overtime. Less than 30 minutes is not considered overtime-eligible in the current rule. This prevents an employee from working continuously for more than 5 hours. The rules also include instructions to give employees a half-hour rest after every five hours.