India’s four new labour codes came into effect on November 21, 2025, marking a major overhaul of the country’s employment framework by consolidating 29 laws. A key change is the uniform definition of wages, which will now be used to calculate Provident Fund, Gratuity, ESI, and other statutory benefits.
This broader wage definition limits exclusions to 50% of total remuneration, prompting companies to revamp CTC structures, particularly those relying heavily on allowances. Experts say the shift will increase both employer and employee contributions to social security, potentially leading to a slight dip in take-home salary if CTC remains unchanged.
Industry leaders warn that organisations must proactively assess cost impacts, revise HR and payroll systems, and update employment contracts. While take-home pay may shrink for some employees, long-term benefits are expected to improve—especially gratuity and retirement payouts, which will now be calculated on a higher wage base.
Other components like PF, bonus, and ESI are not expected to undergo major changes, but companies will still need to recalibrate compensation structures to comply with the new rules.
