Your salary this month may look different from usual. From 1 April 2026, the government has implemented a set of that change how salaries are structured for millions of employees across India.
Under these reforms, an employee’s in-hand salary from April onwards may appear lower than before. The changes are part of the government’s push to strengthen long-term savings and social security benefits for employees.
Four major labour codes introduced by the Ministry of Labour and Employment, and implemented in November last year, now form the backbone of India’s recent labour reforms. These rules aim to replace multiple outdated laws with a simplified, unified wage framework.
Here’s a detailed explanation of how the new rules change your EPF, gratuity and take-home salary.
The 50% rule — how it changes salary structure
The reforms have issued a “uniform definition of wages”, according to which wages now include basic pay, dearness allowance (DA), and retaining allowance. These three components must make up at least 50% of an employee’s total remuneration. At the same time, other components such as bonuses, , and special allowances are classified as exclusions.
However, if these excluded components exceed 50% of the total salary, the excess amount must be added back to wages. This effectively raises the basic wage component for many employees.
Because several statutory benefits are calculated on wages, the change can increase employer and employee contributions to the Employees’ Provident Fund Organisation (EPF) and may also affect benefits linked to wage calculations under the Employees’ State Insurance Corporation (ESIC).
As a result, retirement and social security benefits such as provident fund, gratuity, and insurance coverage could increase, while take-home pay for employees may decline slightly due to higher deductions.
How does the news rule impact Gratuity pay?
As per the new codes, fixed-term employees and contract-based workers become eligible for gratuity after one year of continuous service, down from the earlier requirement of five years.
Previously, there was some confusion about whether the new labour codes were retrospective. However, the Centre recently clarified that the new rules’ gratuity will apply from 21 November 2025.
Notably, since gratuity is calculated based on the last drawn wages and years of service, and basic salary comprises a larger proportion of pay, the exit lump-sum is expected to increase as well.
Employers are required to pay gratuity to eligible employees within 30 days from the date it becomes payable. This benefit does not apply to permanent employees. So for them, the five-year rule remains.
Rishi Agrawal, CEO and co-founder of Teamlease Regtech, noted that for an employee whose basic pay was historically set at 30% of their CTC, shifting to a 50% wage floor results in a 66% increase in the gratuity payout.
“Because is calculated based on the ‘last drawn wage’, this requirement effectively establishes a higher legal floor for the payout, increasing the employer’s total liability,” he added.
EPF contributions to increase
Under the new wage framework, EPF contributions are expected to rise for many employees, according to experts.
“While this shift raises the long-term terminal benefits for the employee, it simultaneously increases the Defined Benefit Obligation (DBO) that companies must provision for on their balance sheets, according to Agrawal. “It also leads to a reduction in monthly take-home pay, as provident fund (PF) contributions, which are also tied to the wage base, increase alongside the gratuity base,” he added.
Experts also told Mint that, as per the EPF Scheme, employers are required to pay up to 12% of your basic pay, and if they already do so, there would likely be little to no change to your PF contribution.
In the short term, employees may see a lower take-home salary if CTC remains unchanged. In the long term, retirement savings improve meaningfully. “The trade-off is between liquidity today and social security tomorrow,” Agrawal said.