New Labour Codes: Private-sector employees need to pay attention to the changes introduced under India’s new labour framework. The government has replaced several older labour laws with four new labour codes, bringing changes related to wages, social security, gratuity and employee benefits.
According to the information provided, the new labour code provisions are set to take effect from November 21, 2025. These changes are expected to have a direct impact on how companies structure salaries and provide benefits to eligible employees.
Here are the key changes employees should know about.
What Is the 50% Salary Rule?
One of the most important changes concerns the structure of an employee’s salary.
Under the new framework, the basic salary is required to account for at least 50% of the total CTC, while the remaining portion can consist of allowances and other components.
This change can affect both employees and employers because several statutory benefits are linked to the wage component.
Will Take-Home Salary Decrease?
For some employees, the new salary structure could result in a lower monthly take-home amount because a higher basic salary may lead to a larger Provident Fund contribution.
However, the additional contribution can also increase the amount accumulated toward long-term retirement savings. Employees could therefore receive greater benefits through their PF and other applicable social-security components when they leave employment or retire.
Major Change in Gratuity Rules
The new labour framework also brings attention to gratuity eligibility, particularly for fixed-term employees.
Under the information provided, employees hired on a fixed-term or contractual basis can become eligible for gratuity after completing one year of service, instead of having to complete five years with the same employer.
For employees on regular or permanent payroll, the existing five-year service requirement continues to apply, subject to the applicable rules and exceptions.
Annual Bonus for Eligible Employees
Another important provision concerns annual bonuses.
Under the stated rules, employees earning less than ₹21,000 per month are eligible for an annual bonus under the applicable provisions. This is intended to provide additional financial support to eligible workers, particularly during the festive and annual-payment periods.
How Much Bonus Can Employees Receive?
The bonus amount can range from 8.33% to 22% of wages, depending on the applicable provisions and the employee’s eligibility.
For workers earning above the specified ₹21,000 monthly threshold, bonus eligibility can depend on the employer’s policies, employment terms and other applicable provisions.
What Do the New Labour Codes Mean for Employees?
The new labour framework is designed to bring several employment-related provisions under a more streamlined system. For private-sector employees, the changes could influence salary structures, PF contributions, gratuity and bonus payments.
While a higher basic salary may affect monthly take-home pay in some cases, it can also increase the contribution toward long-term social-security benefits.
Employees should carefully review their revised salary structure, CTC breakup and employment documents to understand how the new provisions affect their individual pay and benefits.
Note: Labour-law provisions, effective dates, eligibility conditions and calculation methods can depend on the specific rules and notifications applicable to an employee. Employees should verify the latest government notification or consult their HR department for details applicable to their employment.