New labour laws likely to affect CTCs, take-home salary may come down


The Ministry of Labour and Employment is likely to complete the process to finalise the rules for four new labour codes or laws soon and they are likely to be implemented from the coming fiscal year. While there are proposals about four-day week and overtime limit, one thing that will directly affect the salary of employees is the impact of Cost-to-company (CTC) and the take-home pay.

As per a report by Hindustan Times, the new labour laws will prompt the companies to restructure the CTC as they cap several allowances including LTA, house rent, overtime and conveyance at 50% of the total CTC. The definition of the term ‘wages’ has been revised under the Code on Wages 2019 and it comprises of three components now – basic pay, dearness allowance, and retention payment.

Some other components have been excluded from ‘wages’ such as conveyance allowance, HRA, pension and PF contribution, overtime, gratuity, and statutory bonus. If any of these exclusions, in aggregate, are over 50% of the CTC, barring special allowance, the extra amount will be added back to the wage.

With the allowances capped at 50% of CTC, this could result in a lesser take-home salary for employees as companies may have to beat additional costs towards provident fund and gratuity.

On the other hand, the government may also change the existing time limit of overtime under the new Labour Law and working more than 15 minutes beyond the scheduled hours will be considered overtime. Companies will have to pay their employees for this. That is, after the completion of working hours, if an employee works for even 15 more minutes, the company will have to pay for it.

According to an official associated with the development cited by Zee News, the Ministry of Labour has consulted all stakeholders regarding the new labour laws and all the processes will be completed by the end of this month. After this, the process of implementing the rules will be started.


Source: Latest News by www.dnaindia.com.

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