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New
Delhi: Take-home salaries of employees may reduce component
from the next year as companies will need to restructure pay packages once the
government notifies draft rules under the new wage rule.
The new compensation rules, a part of the Code on Wages 2019, are expected to become effective from the next financial year starting in April.
Have a look at the new rules below
New rules under Code on Wages 2019:
1. According to the new rules, the allowance component cannot exceed 50 percent of the total salary or compensation. This means that the basic salary should be 50 percent. Following this rule, employers will have to increase the basic pay component of salaries, resulting in a proportional rise in gratuity payments and employees' contribution to the provident fund (PF).
2. An increase in such contributions would mean a lower take-home salary for employees while the retirement corpus of employees will also, rise.
3. Currently,
most private companies prefer to set the non-allowance part of the total
compensation to less than 50 percent and the allowance portion more. However,
this will change with the new pay rules in motion. These new regulations will
likely affect the private sector employee's salaries as they usually receive
higher allowances.
4. According to the new rules, employers will be required to increase the basic pay of employees to meet the 50 percent basic salary requirement.
5.The Code on Wages Bill, 2019 seeks to amend and consolidate laws related to wages, bonuses, and related matters. It was passed in Rajya Sabha on August 2, 2019, while the Lok Sabha passed the bill on July 30, 2019.
6.The Code will include four labour laws - Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act, and Equal Remuneration Act. After its implementation, these four Acts will be repealed.