By The Indus Zone Media Desk | Published: Nov 26, 2025 | New Labour Law 2025 Salary Impact
India’s new labour codes notified on November 21, 2025, are set to significantly alter how employee salaries are structured and calculated. One of the most critical changes is the redefinition of “wages”, which will directly impact take-home salary, provident fund (PF), gratuity, and social security benefits.
While the reforms aim to create uniformity and long-term security for workers, many employees may notice a reduction in monthly in-hand salary, even if their annual CTC remains unchanged.
What Has Changed in the New Labour Code?
According to the government notification, the new wage structure introduces a uniform definition of wages, which now includes:
Basic Salary
Dearness Allowance (DA)
Retaining Allowance (if applicable)
Under the revised rule, at least 50% of an employee’s total CTC must be treated as wages. If allowances exceed this limit, the excess amount will be added back while calculating PF, gratuity, and other statutory benefits.
This removes the earlier flexibility where companies could keep basic salary artificially low and inflate allowances to reduce statutory deductions.
What This Means for Employees
Legal and tax experts explain that the biggest impact will be seen in higher PF and gratuity contributions, which in turn may lower monthly take-home pay but improve long-term retirement benefits.
Key Outcomes:
✅ Higher PF contribution
✅ Higher gratuity payout on exit
✅ Improved social security coverage
❌ Lower monthly in-hand salary
Experts clarify that employers are not automatically required to increase basic salary, but the statutory calculations will now be based on the revised wage definition, even if salary structure remains unchanged.
How Salary Will Change for 7 Lakh, 10 Lakh and 15 Lakh CTC
Here’s a simplified impact overview based on the new 50% wage rule:
🔹 For ₹7 Lakh CTC
Minimum wage component: ₹3.5 lakh
PF and gratuity will be calculated on this higher base
Monthly take-home likely to reduce slightly
Retirement savings will increase
🔹 For ₹10 Lakh CTC
Wage floor set at ₹5 lakh
PF contribution increases
Gratuity liability becomes higher
In-hand salary may drop by a few thousand rupees per month
🔹 For ₹15 Lakh CTC
Minimum wage base jumps to ₹7.5 lakh
PF deduction increases sharply
Gratuity benefits rise significantly
Monthly salary may see a noticeable dip, but long-term benefits grow stronger
⚠️ Final impact may vary depending on how each company redesigns salary structures after implementation.
Why the Government Introduced This Change
The core objective of the new labour code is to:
Prevent salary manipulation through excessive allowances
Ensure fair retirement benefits for employees
Bring uniformity in wage calculations across industries
Strengthen social security and pension benefits
This reform aligns India’s labour laws with global standards for worker protection.
What Employees Should Do Now
If you are a salaried professional, here’s what you should immediately check:
✅ Review your current salary breakup
✅ Identify ratio of basic salary vs allowances
✅ Recalculate PF and gratuity impact
✅ Speak to HR about revised salary structure
✅ Plan monthly expenses with revised take-home pay
Final Word
The New Labour Law 2025 is a major structural reform that prioritizes long-term employee security over short-term income comfort. While some employees may see a dip in their monthly salary, the retirement corpus, insurance benefits, and gratuity payouts will grow significantly.
This change marks a shift from salary optimization to future financial stability.
