Come April 2021, your take-home salary may reduce

Team Udayavani, Dec 9, 2020, 4:00 PM IST

New Delhi: Come April 2021, the take-home salaries of employees may be impacted as companies would be required to restructure pay packages, owing to the government’s new compensation rules, which are part of the Code on Wages passed by Parliament last year.

According to the new compensation rules, effective from the next financial year, the allowance component of the salary cannot exceed 50% of total compensation.

Presently several companies, mostly in the private sector keep the basic component of salary lower as compared to the allowance, which at times constitutes around 70-80% of the pay package.

Compliance with the new rules means, that employers will have to increase the basic pay component of salaries. Resultantly contribution to provident fund (PF) of both employees and employers will go up and the take-home salary will see a proportionate reduction.