Short answer
Your CTC stays the same, but Basic + DA must now be at least 50% of your pay. If your Basic was lower, it goes up.
A higher Basic means more PF and a bigger gratuity, so in-hand pay can fall a little. If your PF is capped at the wage ceiling, it may not change at all.
What Changed for Salaried Employees
| Area | Before | Under the new codes |
|---|---|---|
| Basic + DA | Often 30-40% of pay | At least 50% of pay |
| PF | On the old Basic | On the new, higher Basic (unless capped) |
| Gratuity | On the old Basic | On the new, higher Basic |
| Gratuity for fixed-term staff | After 5 years | After 1 year |
| Final salary on exit | Often 30-45 days | Within 2 working days |
| Earning leave | After 240 days | After 180 days |
In force from 21 November 2025. States are still notifying some of their own rules, so details can differ by state.
The 50% Wage Rule, Simply
- Wages = Basic + DA + retaining allowance
- Not wages: HRA, conveyance, overtime, bonus, employer PF and gratuity
- If the "not wages" part is over 50% of total pay, the extra is added back to wages
- Result: Basic + DA is at least half of your pay for PF and gratuity
In one line: your salary is not cut, it is moved from allowances into Basic.
In-Hand Salary: Worked Example
Monthly gross Rs 1,00,000 (about Rs 12 lakh CTC). Old Basic 35%, new Basic 50%.
| Old split | New split | |
|---|---|---|
| Basic | Rs 35,000 | Rs 50,000 |
| HRA | Rs 17,500 | Rs 25,000 |
| Special allowance | Rs 47,500 | Rs 25,000 |
| Employee PF if on full Basic (12%) | Rs 4,200 | Rs 6,000 |
| Employee PF if capped at Rs 25,000 | Rs 3,000 | Rs 3,000 |
- PF on full Basic: in-hand falls about Rs 1,800 a month
- If employer PF is also inside your CTC, gross falls too, so the total drop can be about Rs 3,600
- PF capped at the ceiling: almost no change
- The money is not lost: it goes into your PF account
Experts quoted by Business Standard (8 Apr 2026) estimate a drop of Rs 1,000-8,000 a month, depending on CTC and PF setup.
Gratuity Goes Up
| 6 years of service | Last Basic | Gratuity |
|---|---|---|
| Old split | Rs 35,000 | Rs 1,21,154 |
| New split | Rs 50,000 | Rs 1,73,077 |
Formula: 15 ÷ 26 × last Basic + DA × years. Check yours with the Gratuity Calculator.
PF and Tax
- Employee and employer PF both rise if PF is on full Basic
- Your retirement savings grow faster
- Old regime: the higher employee PF counts under 80C
- New regime: very little tax change
- Ask HR which PF option your company uses
Work out your monthly take-home with the CTC to In-Hand Salary Calculator.
Leaving a Job Under the New Codes
- Final wages within 2 working days of your last day
- Leave encashment on the new Basic, use the Leave Encashment Calculator
- Gratuity on the new Basic, and after 1 year for fixed-term staff
- LOP and joining month pay are still worked out per day, see the Salary per Day Calculator
Your whole exit amount: Full and Final Settlement Calculator.
Working Hours and Overtime
- Working hours: up to 48 hours a week
- Overtime is paid at twice the normal wage rate
- Overtime needs your consent
- Women can work night shifts with consent and safety arrangements
- States can set the daily hours and spread within the weekly limit
Common Myths
| Myth | Fact |
|---|---|
| "My salary will be cut" | CTC stays the same, only the split changes |
| "Everyone gets gratuity after 1 year now" | Only fixed-term employees. Permanent staff still need 5 years |
| "PF is now on my full salary" | PF is on wages (Basic + DA and any excess allowances), not on the full CTC |
| "It applies only to new joiners" | It applies to existing employees too |
| "Take-home falls for everyone" | Not if your Basic was already 50% or your PF is capped |
Who Sees Little or No Change
- Basic + DA was already 50% or more of pay
- PF is capped at the wage ceiling
- Government employees, who follow their own pay rules
- People who change jobs before 5 years, for gratuity
5 Questions to Ask HR
- 1Is my Basic + DA now at least 50% of my pay?
- 2Is my PF on full Basic or capped at the ceiling?
- 3Is employer PF inside my CTC?
- 4Will my in-hand change, and from which month?
- 5Can I get the new salary structure in writing?
Switching Jobs? Compare Offers the New Way
- Compare in-hand, not only CTC
- Check the Basic % in the offer letter
- A higher Basic means a bigger gratuity later
- Ask if variable pay is guaranteed
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Frequently Asked Questions
When did the new labour codes start?
All 4 labour codes came into force on 21 November 2025: the Code on Wages, the Industrial Relations Code, the Social Security Code and the OSH Code.
What is the 50% wage rule?
Basic pay, DA and retaining allowance must be at least 50% of your total pay. If allowances like HRA go above 50%, the extra is counted as wages for PF and gratuity.
Will my in-hand salary go down?
It can, if your Basic was below 50% and your PF is on full Basic. If your PF is capped at the wage ceiling, or your Basic was already 50%, there may be little or no change.
Does my CTC change?
No. CTC stays the same. Only the split changes: more Basic, less special allowance.
Will my gratuity increase?
Yes, if your Basic goes up, because gratuity is 15/26 of your last Basic + DA for each year of service.
Do fixed-term employees get gratuity after 1 year?
Yes. Under the Social Security Code, fixed-term employees get gratuity after 1 year of service. Permanent employees still need 5 years.
How fast must full and final be paid now?
Wages must be paid within 2 working days of the last working day under the Code on Wages.
Does the new labour code lower my income tax?
Slightly, in the old regime: higher employee PF counts under 80C. In the new regime the tax change is small.
Naye labour code se salary kitni kategi?
CTC same rahega. Basic 50% hone se PF badh sakta hai, isliye in-hand thoda kam ho sakta hai. PF ceiling par capped hai to farak kam ya zero.
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About the author
Prajwal Karkera
Digital product specialist with 8+ years of experience in digital products and the creator of ToolsFlow. I write simple guides for everyday tasks. More about me