My First Salary Slip Under the New Labour Codes

My take-home pay fell about ₹1,100 this month, and HR sent an email about “wage definition.” I was annoyed. Then I read the rules.

Four codes, one new definition

On November 21, the government brought four labour codes into force, replacing 29 older laws on wages, industrial relations, social security and workplace safety. For a salaried employee like me, the most important change is a single sentence about what counts as “wages.” Under the new rules, basic pay and dearness allowance must make up at least half of total pay. Allowances above that limit are added back.

Many companies, including mine, had kept basic pay low and allowances high. That kept provident fund contributions low, because PF is calculated on basic pay. The new definition forces basic pay up, which means more of my salary now goes into provident fund every month.

Where my ₹1,100 went

My cost to company did not change. What changed was how it was divided. My basic pay rose, my employee PF contribution went up with it, and my employer’s contribution, which is part of my cost to company, also rose. The result was about ₹1,100 less in my bank account each month and about ₹2,200 more in my provident fund account.

Gratuity, the lump sum paid when you leave a company after enough years, is also calculated on wages, so that will be higher too. And under the new rules, fixed-term employees can qualify for gratuity after one year rather than five, which matters a lot for people on contracts.

Why I am less annoyed

The money did not vanish. It moved from spending money to retirement savings, earning a government-set interest rate that is higher than my savings account. At 23, that is probably where more of it should have been anyway. The codes also bring gig and platform workers, like the delivery riders who bring my dinner, into the social security system for the first time, funded partly by a contribution from the platforms.

There are fair criticisms. Lower take-home pay hurts people living month to month, and some employers may try to offset higher PF costs by slowing future raises. But for a first earner, the codes did something I would not have done myself, which is save more automatically. A lower number on the payslip is not always a loss. Sometimes it is the future version of you getting paid first.