New Labour Codes 2026 India — How the 4 Labour Codes Change Your Salary, Working Hours, and Take-Home Pay
India’s four new labour codes — consolidating 29 old laws — were implemented in 2024-25. For salaried employees, the biggest change is in the definition of wages, which affects your PF contribution, gratuity, and take-home pay.
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The First Principle: What Changed?
First Principle: The new codes define “wages” as 50% of your total CTC. This means your PF contribution (12% of wages) is now calculated on 50% of your CTC instead of just basic pay — increasing your PF contribution and reducing your take-home pay.
Key Changes in the 4 Labour Codes
| Code | Old Law | New Change |
|---|---|---|
| Code on Wages, 2019 | Multiple definitions of wages | Uniform definition: 50% of CTC = wages |
| Industrial Relations Code, 2020 | 100+ employee threshold for standing orders | 300+ employee threshold |
| Social Security Code, 2020 | ESIC only for ₹21,000/month or less | ESIC threshold raised to ₹28,000/month |
| Occupational Safety & Health Code, 2020 | Separate laws for factories, construction, etc. | Unified safety standards for all workplaces |
How the New Wage Definition Affects You
Under the old system, PF was calculated on basic pay (typically 25-35% of CTC). Under the new code, PF must be calculated on 50% of CTC. Example:
- CTC: ₹12,00,000
- Old PF (basic = ₹36,000): ₹4,320/month employee contribution
- New PF (wages = ₹50,000): ₹6,000/month employee contribution
- Monthly take-home reduction: ~₹1,680
Gratuity also increases: Calculated on wages (50% of CTC) instead of basic pay, increasing the gratuity payout when you leave.
Working Hours and Overtime
- Maximum working hours: 48 hours/week (8/day) — unchanged from old law
- Overtime: Twice the ordinary rate of wages for any work beyond 48 hours/week
- Four-day work week: Allowed if total does not exceed 48 hours/week
The Smart Friend’s Verdict
Your take-home pay will decrease by 2-4% as PF contributions rise on the new wage definition. But your PF corpus and gratuity at retirement will be larger. In job offers, negotiate a higher CTC to offset the reduced take-home. Companies can structure allowances differently, but the 50%-of-CTC rule is mandatory.
Next: CTC vs In-Hand Salary — understand how your salary is structured under the new codes.