The government has clarified that the recently introduced Labor Codes will not reduce take-home salaries as PF deductions will continue to follow the ₹15,000 wage ceiling, with additional contributions being optional. In a post on social media platform X, the Ministry of Labor and Employment informed: “The new Labor Codes do not reduce take-home if PF deduction is at the statutory wage ceiling. PF deductions remain based on the wage ceiling of ₹15,000 and contributions above this limit are voluntary, not mandatory.” Since the Labor Codes were announced last month, there have been concerns about a reduction in net salary, as the new rule requires basic pay and related components to make up at least 50% of total wages with the new definition of ‘wage’. This has raised concerns about higher PF contributions and lower take-home pay, according to various reports. According to an earlier Mint report, the change in definition is expected to affect the calculation of various social security contributions, including Provident Fund (PF), Employees’ State Insurance Corporation (ESIC), Workmen’s Compensation, and maternity benefits, which may also impact take-home salaries. Read the full report here. However, the EPF wage ceiling is ₹15,000, which means contributions are mandatory only up to this amount. According to the Ministry, there is no change in take-home if deductions are based on this ceiling. Employees and employers can voluntarily contribute beyond this limit, but it is not compulsory. An illustration The ministry further explained with an illustration – An employee earns ₹60,000 per month, with a basic salary and DA totaling ₹20,000 and allowances of ₹40,000. If the EPF contribution of ₹1,800 with 12% contribution is accepted under the ₹15,000 ceiling, the take-home pay remains unchanged under both the new and old labor codes. PF contribution is applicable only up to the statutory wage ceiling of ₹15,000 irrespective of actual basic pay. Take-home pay before the labor codes Employer PF (12%) = ₹1,800 Employee PF (12%) = ₹1,800 Take-home pay = ₹56,400 Take-home pay after the labor codes Employer PF (12%) = ₹1,800 Employee = ₹1.0%) salary = ₹56,400 (unchanged) The new Labor Codes require allowances to be limited to 50% of total wages become If allowances exceed this limit, the excess must be included in wages for statutory calculations. However, PF remains linked to the ceiling of ₹15,000 unless it is voluntarily increased. New labor codes The government released new codes by consolidating 29 laws into four labor codes on 21 November, with the aim of promoting ease of doing business while protecting workers’ rights. These include the Wages Code, Industrial Relations Code, Social Security Code and Occupational Safety Code. Several key provisions have been introduced under the latest Labor Codes, which are likely to affect more than 400 million workers across both the formal and informal sectors.