New Wage Rule Postponed: Your Salary Will Remain Same Effective April, No Reductions Will Happen

Finance Minister Nirmala Sitharaman had said that the Central government will be implementing the New-Wage Code Bill 2021 from April 1, 2021.

But the Centre reported on Wednesday that the new wage code affecting take-home pay, which was set to reduce from April 1, would remain the same until a further decision is made in the matter, which is a significant relief for salaried employees. The decision has been delayed by the government due to ongoing reforms in certain states’ labour codes.

The decision to introduce the new pay code has been postponed, according to a senior official from the Labour Ministry. Three other codes – social security, industrial relations, and occupational safety, health and working conditions – have also been postponed from their original April 1 deadline.

Industry Experts On The Delay

 Compensation, legal, and recruitment experts see this as a temporary relief. These experts are collaborating with thousands of businesses to develop a new compensation system for workers that include moving 50 per cent of gross wages under the basic pay umbrella, as well as other reforms required under the new wage code.

Companies will have more time to rework employee benefits processes as a result of the delay. According to compensation expert Aon, most businesses are still waiting for clarification on which components should be included or excluded from basic pay.

The new Wage Code

The Wages Code, which was passed by Parliament last year, contains these new laws. Indian companies/employers/workers will see improvements in such compensation components as take-home wages, provident fund and gratuity, payslips, and so on once they are implemented. As a result, India Inc’s balance sheets will be impacted.

 The Wage Code extends to both government and private sector employment. Allowances will be capped at 50% of gross pay under the current concept of wages. In the private sector, the basic pay portion must account for 50% or more of a worker’s overall salary. For government employees, this basic salary will consist of basic pay plus DA, which must total 50% or more.

Take-Home Salary May Reduce From Next Financial Year

Companies are preparing to restructure pay packages in line with the government’s plan to churn a new wage law, according to the government, which reported last year that take-home pay will decrease from the next financial year. Furthermore, following the implementation of the code, both worker and employer contributions to the Provident Fund would increase. As a result, most employees’ take-home pay would likely decrease. Rather than the basic wage, most private companies now have a higher allowance portion. As a result, the proposed pay code is projected to have the greatest impact on private workers if it is enforced.

Experts say that, while the employee’s take-home pay will decrease, the new laws would offer improved social security and retirement benefits.