What is the new wage code and how is it going to impact the take home amount ?
The new wage code implemented by the state and federal government has changed the structure if the ctc. CTC is as we all know is a tricky term for a newbie and has various elements that benefit the employees. For instance, the employee receives allowances that procure towards the annual CTC package. These benefits are allocated by the organization to provide the workforce with a secure job platform. It adheres with the labor law implemented by the state and federal government which protects the employees from exploitation.
However, since the pandemic, the laws have been amended. The uncertain streak of events has made the government amend rules to protect the working population of the nation.
Let’s take a look at the impact on the take-home amount :
Basic pay
The compensation structure has been changed with the amendments has changed along with the new code. The compensation structure has ranged from 30-40 % of the gross salary. The basic pay due to the new wage code has been capped at about 50 % of the ctc amount to sum up the allowance upto 50% of the gross salary.
Provident Fund
Provident func has always been a tricky term for the each employee. The provident fund is usually calculated on employee’s basic pay, considering the DA, i.e dearness allowance offered by the employer. In accordance with the new wagbe code, the contribution of both the employee and the employer is now 50 % of the employees salary amount.
This eventually increases the PF contribution and decreases the take home amount of the employee.
Gratuity
Gratuity, as known it the amount that an employee receives at the final or permanent employee duration. The employee receives the amount to support in the time of crisis. For instance, if the employee faces an unfortunate event that may result in death or disablement, the gratuity amount is credited to the employee or their family members.
How is the new wage code going to impact on take-home amount after-tax deductions?
The take home amount can be reduced depending on the salary bracket the employee belongs to. The impact of the new wage code is determined to be higher for the lower salary bracket group than the higher salary group.
The basic pay for a lowered salary personal lacks in being a significant total component of the remuneration. In such cases, the deduction of the tax amount increases hampering the take-home amount.
However, the take-home amount for those who receive a significantly higher salary has an increased basic pay scale which does not hamper the take-home amount. The high basic pay can be up to 50% of the total remuneration amount.
The reason behind implementing such laws
The reason behind such amendments is stated as to provide insurance to the employees in such uncertain times. The state and federal government aims in securing retirement for millions of employees.
The elements that needs to be highlight under the new wage code for employees in their salary break-up
The new wage code in imposed in the year 2021. This is why it has many layers which needs to be read carefully before acceptance of any offer letter or changes in the CTC break-up. If any employee is looking for a job change he/she needs to understand that the breakup is updated under the new wage code of 2021.
It is imperative to pay heed to the provident fund contribution and pension schemes to remunerate for any loans or interests that need to be paid.
There are a few takeaways which can help in gaining a better insight on the new wage code :
- The take-home amount for lower-waged employees is drastically hampered, however, the employee with a higher salary bracket may not experience much difference in the amount.
- The new wage code ensures that the allowance of the CTC calculation has to include at least 50% of the gross salary of the employee.
- The new wage code has altered the calculation of gratuity and provident funds.
These are a few impacts that the new wage code can be experienced by the employees.
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