In-hand salary to reduce under new Labour Codes? Here’s what govt said

Since the New Labour Codes were notified last month, many employees feared a drop in in-hand salary. Now, the Labour Ministry has clarified that the new Labour Codes do not reduce take-home pay, so long as provident fund (PF) deductions continue to be calculated on the statutory wage ceiling of Rs 15,000. 

In a tweet, the ministry wrote, “The new Labour Codes do not reduce take-home pay if PF deduction is on statutory wage ceiling. PF deductions remain based on the wage ceiling of Rs 15,000 and contributions beyond this limit are voluntary, not mandatory.” In case the employee and employer agree, they can voluntarily contribute on wages more than the statutory limit of Rs 15000. There is no legal requirement for the same, the ministry added.

Why confusion over in-hand salary under new labour codes

It was due to the new rule mandating that basic pay and related components must make up at least 50 per cent of total wages. Many assumed this would automatically increase PF contributions and reduce take-home income. This means that for the overwhelming majority of salaried workers, whose PF is capped at the ceiling, monthly deductions remain unchanged. Under the new framework, the only situation where take-home pay may fall is if an employee and employer jointly decide to compute PF contributions on a salary higher than Rs 15,000. This is optional, not mandated.

Four new labour codes

The Union government on November 21, 2025, consolidated 29 labour laws into four labour codes — the Code on Wages, Industrial Relations Code, Social Security Code and the Occupational Safety, Health and Working Conditions Code.

The new Labour Codes do not reduce take-home pay if PF deduction is on statutory wage ceiling.
PF deductions remain based on the wage ceiling of ₹15,000 and contributions beyond this limit are voluntary, not mandatory.#ShramevJayate pic.twitter.com/zHVVziszpy

— Ministry of Labour & Employment, GoI (@LabourMinistry) December 10, 2025