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We all eagerly wait for the last date of the month, because on that day the message of ‘Salary Credit’ comes on the mobile. But now the amount shown in that message may seem slightly less. Don’t worry, your salary has not decreased, just the mathematics of salary has changed a bit due to the implementation of new labor codes of the government.
This is going to affect everything – your pocket, the company’s HR department and the balance sheet. If your basic salary is less than half of the total package (CTC), then this news is especially for you.
The old game is over, now the new rules begin
For years, a fixed formula of salary structure was being followed in private companies. Companies deliberately kept the ‘base salary’ of employees low (often 25% to 40% of the total package). The remaining money was given in the name of ‘allowance’. Its advantage was that PF was deducted less and the employee got more cash to spend (Take Home Salary).
But the new Labor Code has put a stop to this old system. Government says that now your ‘Basic Salary’ will be less than your total CTC. at least 50% It must happen.
What effect will it have on your pocket?
Let us understand this in very simple language. As your basic salary increases, your PF (Provident Fund) share will also increase. This is because PF is always deducted on basic salary. Besides, your gratuity will also increase.
This means-Both advantages and disadvantages.
- Loss: Every month the money coming into your bank account (Cash in Hand) will reduce slightly.
- Benefit: Your PF fund will become bigger and you will get more money on retirement. The amount of gratuity will also increase. That is, “A little harsh today, but tomorrow’s future is safe.”
Understand your loss and profit with example
Suppose, your total package (CTC) Rs 1 lakh per month Is.
Old System:
Till now if your basic salary Rs 30,000 If it was, then PF would be around 12%. Rs 3,600 Was cutting. The remaining Rs 70,000 was received as allowance.
New System:
According to the new rule, the CTC of Rs 1 lakh will be at least 50% of the basic salary i.e. Rs 50,000 Will have to do. Now 12% of PF Rs 50,000 i.e. Rs 6,000 Will be cut.
Result: Earlier Rs 3,600 was deducted from your salary, now Rs 6,000 will be deducted. That means your take-home salary will directly be reduced by Rs 2,400.
Experts, such as Kuljit Singh, director of Gi Group Holding, believe that this will increase the expenses of the companies and reduce the monthly income of the employees, but in the long term it is in the interest of the employees. It’s like forced savings that will make you happy when you leave your job or in retirement.
