A bad news has come for the employees. In-hand pay of employees may be cut from the beginning of the next financial year i.e. April.
For this reason, there will be a rule implemented by the central government, not the employer.
In fact, under the Central Government Code on Wages 2019, a rule made in the context of bonuses and wages, now a major part of the salary of employees will be deposited in their retirement fund.
The ‘Code on Wage Bill’ was passed in Parliament last year.
Explain that to increase the retirement benefits of employees, the government passed the Code on Wage Bill, 2019 (Code on Wages Bill) in Parliament last year.
This includes labor laws such as the Minimum Wages Act, Wage Payment Act, Bonus Payment Act and Equal Remuneration Act.
Union Labor and Employment Secretary Apoorva Chandra had asked to implement it from 1 April 2021 in October.
What will happen under the new rule?
As per rules, the contribution of gratuity and provident fund should be at least 50 percent of the total salary of the employees.
To comply with this rule, employers will have to increase the basic salary of their employees by 50 percent. This would mean that in-hand pay of employees could be cut.
However, after the implementation of this rule, private sector employees will get more benefits on retirement than before.
Companies will have to restructure the salary to follow the rules
Payroll experts Mint Told that companies contributing to Provident Fund (PF) on the basis of real pay will have to restructure the salaries of all their employees to implement the new rules.
Currently, employers and employees can opt for the PF option, but after this rule, if the basic salary of an employee is 15,000, then the employer and employees will have to deposit 12 percent of the amount in the PF.
Most private companies keep the basic salary low
Most private companies currently keep their employees’ basic pay below 50 percent and other allowances more than 50 percent.
Lohit Bhatia of Quess Corp, a business services provider company, said on the new rule, “Companies generally take the salaries of employees at the CTC break-up. This means that the employer is less than 50 percent of the basic salary of the employees and others including the house Keeps more of the allowances.