As companies begin to align employee pay structures with the new Labour Code, the impact on take-home pay is emerging as the biggest discussion point within India Inc, more so in the appraisal season. Companies are realising that clear communication will be the biggest determinant of how employees perceive the transition.

The key change in the new code is the definition of ‘wage’, an equivalent of the erstwhile ‘basic’ pay. While most Indian companies used to keep proportion of basic component lower, it now needs to be 50 per cent of total pay. This means PF and other statutory deductions, calculated on this base, will now be larger, leading to marginally lower take-home pay, depending on the tax slab, and other considerations. However, long-term social security benefits improve due to higher accruals.

Radhika Viswanathan, Executive Director, Deloitte India, says companies are mindful of the potential impact on take-home pay and are running detailed scenario analyses to identify where take-home pay could be affected, and how they can legally mitigate that. For instance, the new Labour Codes do not reduce take-home pay if companies have been calculating PF deductions on statutory wage ceiling of ₹15,000. Anything beyond this limit is voluntary, not mandatory, she notes.

“We are seeing uneven but definite on-ground movement on Labour Code compliance,” Srinivasa Bharathy, MD and CEO, Adrenalin eSystems, which makes software for Labour Code-led restructuring, said. Some enterprises are aligning wage restructuring with appraisal cycles, while others remain cautious due to CHRO-CFO alignment, among other reasons, he adds.

For instance, the HR of a Chennai-based mid-size IT company said that they are awaiting final notification of State Rules to implement the restructuring.

Malathi KS, Director, Rewards Consulting, Products and Global Mobility Practice, Mercer India, says that large listed companies have either already implemented or doing final checks. IT/BPO/start-ups are still in awareness stage, and mid-market and SMEs are largely unaware, she adds. “The practical advice we give clients — do not wait for your State Rules to start the CTC financial modelling,” she said.

A clear and structured communication to employees is key, experts note.

Amit Kumar Otwani, Associate Partner, Talent Solutions, India, Aon, said that a practice companies can follow is “before-and-after salary statements”, that compare old basic versus revised basic, PF contribution impact, gratuity accruals, revised net pay, etc, he said.

For instance, gratuity, which was shown within CTC earlier, now has to be shown separately, outside of total pay. As TCS rolled out their new pay structures recently, this exclusion led to widespread confusion among staff. The IT major is now sending e-mailers and elaborate FAQs on the Labour Code changes.

Published on May 22, 2026