New wage code may be implemented from 1st October 2021! Here's how it will impact your salary

By Lokmat English Desk | Published: September 26, 2021 10:55 AM2021-09-26T10:55:44+5:302021-09-26T10:55:44+5:30


The central government is likely to implement the new wage code from October 1. The wage code was to be implemented from April 1. However, some state governments delayed implementation. The wage code can now be applied from October 1.

All states have drafted a new wage code. Salary, leave and working hours will change drastically once it is implemented. There is going to be a big change, especially in the tech home salary.

There will be a big change in the salary structure of the employees after the implementation of the new wage code. The in-hand salary received by the employees may be reduced. The new wage code stipulates that the share of basic salary in the total salary of employees should not be less than 50 per cent.

Currently, most companies keep the basic salary share in the total salary low and allowances high. This puts less burden on the company. But it can no longer be done.

An employee's cost to company (CTC) consists of four main components. These include Basic Salary, House Rent Allowance (HRA), Retirement Benefits (including PF, Graduation, Retirement Pay) and tax saving allowances e.g. Includes LTA and entertainment allowances.

At present, many companies show low salaries in basic salary. While other allowances show higher amounts. But now the amount of other allowances cannot be kept more than 50% of the total salary. Therefore, of course, the basic salary has to be kept at 50%.

E.g. If a person has a salary of Rs 50,000, his basic salary should be Rs 25,000. Other allowances should be Rs 25,000. Therefore, companies that keep the basic salary at 25 to 30 per cent of the total salary will have to make major changes in the salary structure.

The new wage code will uphold the decision to work 48 hours per week. When a person works 8 hours a day, he has to work 6 days a week and get one day off.

If a company decides to work 12 hours a day, those who work there will get 3 days off a week. If the working hours increase, the week will be 5 or 4 days instead of 6. This requires the consent of the company and the employees.