What is the New-Wage bill?

New Wage bill

Central Government has decided to introduce New Wage Code Bill 2021 from the financial year April 1, 2021. The Bill has a direct effect on the salary of government employees, gratuity, and provident fund. Basically, the bill contains three components, i.e.,

• Basic pay

• Dearness allowance

• Retention payment

Whereas the code of wages proposes to influence salaries paid to employees, it is necessary to know that some wages aren’t included such as:

• Pension and PF contribution 

• Bonuses

• HRA 

• Overtime

• Gratuity

• Commission retrenchment compensation. 

What are the impacts of the New-Wage Code Bill 2021?

1.    Shift in PF Contribution:

PF contribution is calculated by the basic salary and dearness allowance. with the introduction of the code, the PF contribution of employees will also change.

2.    Gratuity:

The code enables the employees to claim gratuity after spending a year at an organization, as opposed to the previous laws, which permitted gratuity after 5 years. The gratuity will be calculated by including basic pay, special allowance, travel, etc., increasing the gratuity value.

3.    Hike in DA:

The central government has planned to increase the dearness allowance by 4%. 

4.    Basic pay:

It will become compulsory that basic pay accounts for 50% of an employee’s net CTC.

5.    Allowances:

House rent allowance, conveyance allowance, leave travel allowance, overtime allowance will be capped to the remaining 50% of your CTC.

CONCLUSION

The increase in PF contribution, gratuity doesn’t mean you will receive a higher salary. Rather, these monies will be saved for security purposes or emergency situations of the employees. Eventually, if you are a highly paid employee, you will have a change in gratuity as well as superannuation payouts. If you are in the medium range employee, you would receive bonus, gratuity, superannuation payouts.

Author:

Ruprekha Jena
Bhubaneswar
3rd Year Law Student from KIIT School of Law, Bhubaneswar