Labour Ministry Confirms Take-Home Pay Will Not Reduce Under New Labour Codes
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The Labour Ministry has issued a clarification to address widespread concerns about reduced in-hand salary under the new Labour Codes. The ministry stated that employees’ take-home pay will not decrease as long as Provident Fund (PF) deductions remain linked to the statutory wage ceiling of ₹15,000.
The clarification, shared through the Ministry of Labour and Employment’s X handle, emphasised that PF deductions continue to be calculated based on the wage ceiling. Contributions above ₹15,000 remain voluntary and are not mandatory for either employees or employers. This message aims to counter assumptions that the restructuring of wages would automatically lower take-home pay.
The confusion began after the Labour Codes were notified on November 21, 2025, requiring basic pay and related components to form at least 50% of total wages. Many believed this would raise PF contributions, thereby reducing in-hand earnings. However, the ministry explained that PF calculations do not automatically rise with a higher basic pay unless both parties choose to contribute on the increased amount.
For most salaried employees whose PF deductions are capped, the monthly deduction will stay unchanged. An illustration shared by the ministry showed that even if an employee earns ₹60,000 monthly with a revised wage structure, PF continues to be calculated on ₹15,000 — resulting in the same employer and employee contribution of ₹1,800 each.
Allowances that exceed 50% of wages must be rebalanced under the new code, but PF calculations remain unaffected unless voluntarily raised.
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The Labour Ministry’s clarification provides welcome relief to salaried employees concerned about reduced take-home pay. By confirming that PF remains capped at ₹15,000 unless voluntarily increased, the government has removed uncertainty around wage restructuring. Clear communication on such policy changes is essential for financial planning and employee confidence.