New wage code: why your take home pay changes

No law cut your salary. What changed on 21 November 2025 is the legal meaning of the single word “wages”, and that meaning now decides how much of your monthly pay counts for provident fund and for gratuity.

If you are short on time, jump to the worked example below. It is the government's own.

The four codes were made effective from 21 November 2025, as the Press Information Bureau announced. The definition is genuinely in force, not notified and deferred: S.O. 5322 of that date brought sections 1 to 41 of the Code on Wages into force, and the definition sits at section 2.

Section 2(y) of the Code on Wages, 2019 says wages includes basic pay, dearness allowance and retaining allowance, and excludes eleven heads, among them statutory bonus, employer provident fund contributions, conveyance allowance, house rent allowance, overtime allowance, commission, gratuity and retrenchment compensation. Then comes the proviso that does all the work:

“Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent. as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent. so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause.”

Read it slowly. It never says basic pay must be half of anything. It says the excluded heads together cannot exceed half of total remuneration, and the surplus is pushed back into wages. The Code on Social Security, 2020 repeats the definition at section 2(88), which is how one rule reaches both provident fund and gratuity.

One-half is the figure in the Act, which lets the Central Government notify a different per cent. No such notification has been traced, and the Ministry FAQs still work on 50 percent.

This illustration is from the Ministry of Labour FAQs.

The number people get wrong is that ₹2,000. Add ₹40,000 and ₹16,000 and you get ₹56,000, which is ₹18,000 above the half mark. That is not the answer. The proviso bites only on clauses (a) to (i), and gratuity and retrenchment compensation are clauses (j) and (k), outside the test. So the sum is ₹40,000 minus ₹38,000, and that ₹2,000 joins the ₹20,000.

A “special allowance” line is not on the excluded list at all, so it was always inside wages. Two heads work the other way. Overtime counts towards the test, confirmed in the Ministry additional FAQs of 16 March 2026, and so does statutory bonus, which is clause (a). A big bonus pushes you towards the half mark, not away from it.

Your gross does not change. What changes is the split between what reaches your bank account and what is locked away.

Take the Ministry example and an employer that contributes on actual wages. At the base rate of ten per cent in section 16(1)(a), provident fund on the old ₹20,000 figure is ₹2,000 a month from each side. On the new ₹22,000 figure it is ₹2,200. That is ₹200 more into retirement savings and ₹200 less in hand, each month, on a gross that never moved. Gratuity rises for the same reason. Nobody can quote you a percentage without seeing your own payslip.

Provident fund now sits in Chapter III of that Code. Section 16(1)(a) sets the employer contribution at ten per cent of wages, and lets the Central Government notify establishments where twelve per cent is substituted instead. Yours equals the employer contribution. Read your own rate off your payslip.

• Allowances already at or below half. No excess, no add-back, nothing changes.
• Employers who contribute only up to the ceiling. Section 2(89) defines a wage ceiling as the wages notified for membership under Chapter III and Chapter IV. On 29 May 2026 the Ministry notified ₹15,000 a month as that ceiling, by S.O. 2702. If your employer works off that figure, a bigger wage number moves your provident fund by nothing.
• Pay that is largely variable. The Ministry FAQs state that performance based incentives, employee stock option plans and reimbursement based payments are not part of wages at all.

A second proviso keeps house rent and conveyance inside the count for equal wage and timely payment questions.

The Payment of Gratuity Act, 1972 stands repealed by section 164(1) of that Code. Gratuity is now section 53: 15 days of wages for every completed year of service, or part of a year in excess of six months, on the rate of wages last drawn. The Ministry FAQs put the current maximum at ₹20 lakh. Five years of service is not required where employment ends by death, disablement or expiry of a fixed term contract.

1. List every line other than basic pay, dearness allowance and retaining allowance. Leave out gratuity and retrenchment compensation.
2. Compare that total against half of your total remuneration. If it is higher, add the difference to basic plus dearness allowance. That is your statutory wage figure.
3. Open your EPFO passbook and read the wage figure the monthly contribution was worked out on.
4. If that is the ceiling amount, your provident fund will not move. If it is your actual wages, expect the contribution to rise and in hand pay to fall.

A private employer is not a public authority under the Right to Information Act, 2005. An RTI addressed to your company will go nowhere: no Public Information Officer sits inside it.

The Employees Provident Fund Organisation, the Ministry of Labour and your state labour department are public authorities. So when provident fund is short, lodge the grievance first, then use RTI for the paper trail.

1. Lodge the grievance on the EPFO portal at https://epfigms.gov.in and note the registration number.
2. Complain in writing to the labour department for that establishment.
3. File an RTI to EPFO asking for records, not opinions: contributions credited against your UAN for named months, whether the establishment filed its returns, and what action was taken.

Draft it with the AI RTI Drafter. If the reply is silence or evasion, escalate using the First Appeal Builder within 30 days of the deadline. For the wider strategy, read The RTI Playbook.

No. Neither Code authorises a pay cut. They changed how much of your existing pay counts as wages for statutory calculations. If your employer restructures your package and your gross falls, that is the employer's own decision, and a matter for the labour department.

No, and this is the most repeated error about the codes. The proviso to section 2(y) tests whether the listed excluded heads exceed one-half of total remuneration. Only the surplus is added back. The base is total remuneration, not cost to company, and basic pay is never what gets tested.

21 November 2025. S.O. 5322 of that date brought sections 1 to 41 of the Code on Wages, 2019 into force, and the definition is at section 2(y). The Ministry of Labour confirms the same date in its FAQs, and says gratuity on the revised definition applies from then.

Not necessarily. It rises only if your excluded allowances exceed half your total remuneration and your employer contributes on actual wages rather than on the notified ceiling of ₹15,000. Your EPFO passbook shows which figure was used, so check that first.

Not against a private employer. Direct the RTI to the Employees Provident Fund Organisation, and ask for the establishment compliance record and the contributions credited to your account. Lodge a grievance on the portal first, so your RTI can also ask what came of it.

• Code on Wages, 2019, section 2(y): https://www.indiacode.nic.in/bitstream/123456789/15274/1/the_code_on_wages.pdf
• Code on Social Security, 2020, sections 2(88), 2(89), 16, 53, 164: https://www.indiacode.nic.in/bitstream/123456789/16823/1/aA2020-36.pdf
• S.O. 5322, 21 November 2025: https://egazette.gov.in/WriteReadData/2025/267885.pdf
• S.O. 5319, 21 November 2025: https://egazette.gov.in/WriteReadData/2025/267882.pdf
• Corrigendum S.O. 5936, 19 December 2025: https://www.labour.gov.in/static/uploads/2026/01/639a9f531898f5a767b1e45e762c2d87.pdf
• S.O. 2702, 29 May 2026: https://www.labour.gov.in/static/uploads/2026/06/1dbfa6f5ef9510c30fa6c32008d1f816.pdf
• MoLE FAQs on Labour Codes: https://www.labour.gov.in/static/uploads/2026/01/de4758d5bfeffc456d7de97a801891b0.pdf
• MoLE Additional FAQs, 16 March 2026: https://www.labour.gov.in/static/uploads/2026/03/a4ccf4c6d97c4f1f36a6d83f8c64213d.pdf
• PIB, labour codes made effective: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2192463
• PIB, Year End Review 2025: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2209767

• Recovering unpaid minimum wages under the Code on Wages, if the problem is money never paid.
• What the Right to Information Act, 2005 actually covers, before you pick an office.