Kartik Jhaveri, Chief Wealth Officer at Transcend Capital, said: “The new payroll law proposes that an employee`s base salary should be at least 50% of their net CTC (cost to business). In current practice, this is approximately 20-25% of an employee`s net CTC. From a Social Security perspective, this is good because it will help an employee get more PF (Provident Fund) contributions from their employer, as the monthly FP contribution is tied to the base salary. However, Kartik Jhaveri claimed that due to the increase in the monthly FP contribution, an employee`s monthly FP contribution will also go north. Since this employee contribution is part of the CLC, an employee`s net income is expected to decrease after the new wage legislation comes into force. “Currently, the basic salary is in the order of 30 to 40% of the gross salary. Allowances constitute the balance. However, the new payroll law stipulates that the basic salary must be at least 50% of the gross salary. “This provision will result in a decrease in compensation for most employees,” says Sudhir Kaushik, General Manager of taxpanner.com. Under the new rules, the basic salary cannot be less than 50% of the CBA. Currently, this represents between 30 and 40% of the gross salary.
The rest is covered by allowances such as HRA, phone charges, newspapers, etc. Now that the base salary is going up, the benefits will go down. Read also – Private companies must deduct withholding taxes for free or rights shares: consult the guidelines of the CBDT | 5 points An employee`s CLC consists of at least four main components such as rent allowance (HRA), base salary, pension benefits such as FP, national pension system, and various tax-advantaged allowances. As a result, the salary structure of private employees will change and change significantly in 2022 – the most important being a lower take-home pay and a higher contribution to the provident fund. Taxes payable will inevitably increase after the 2022 Wages Act changes. What for? As the base salary increases, taxes will also increase accordingly. However, a portion of the HRA and premium is not taxable under the existing rules. The most immediate impact of the new salary scale, which will be introduced in 2022, will be the change in the wage bill. A plethora of significant changes in the wage structure of the private working class can now be observed.
A new legal code urging companies to speed up final payment of employees who resign could be delayed as several states have yet to develop implementing rules. The wage code is a constitutional requirement and must be designed on the basis of central government guidelines. It will be implemented as soon as the Centre receives draft guidelines from all States and UTs. Under the Code, businesses are required to make full and final payment within two days of an employee`s last day of work. This may be due to termination, termination or termination of the employment relationship. Currently, businesses need 15 to 60 days to pay final severance pay. The new pay code reads: “If an employee – (i) has been removed or dismissed; or (ii) has been dismissed or has left the service or has become unemployed as a result of the closure of the enterprise, the wages due to him shall be paid within two working days of his dismissal, dismissal, reduction or, where applicable, termination. However, bonus and pension funds do not fall within the scope of the new Wages Act. It applies only to remuneration in the form of salaries or allowances. The rule should be a great relief for employees who have to comply with long notice periods and wait for their final payments. According to the Code, the base salary will be 50% of the total amount. The Code increases the contribution to the Employees` Provident Fund and sets it at 12% of the basic salary. Tips and retirement will also increase, but take-home pay may decrease.
Companies are allowed to have their employees work 12 hours a day, 4 days a week. The number of working days may decrease, but the hours remain the same. For example, if a person has a salary of Rs 1 lakh per month, the previous base salary was Rs 30,000-40,000 and the rest was the allowances. Now the base salary will be at least 50,000 rupees and allowances will have to be lowered so as not to exceed the 50% limit. Under EPFO rules, it is mandatory for an employee to pay 12% of their base salary into their PF account. The PF regulator also requires employers to pay 12% of the employee`s monthly base salary into their PF account. For organizations entering or already present in the Indian job market, now might be the time to work with an international payroll specialist in India. In addition to complying with the new compensation code and respecting existing systems, local experts will help make decisions regarding possible salary increases to mitigate the base salary decline or the implementation of supportive benefits and their fiscal impact. New Wages Law 2022: After a delay of more than a year, the four long-awaited labor laws on wages, social security, industrial relations and safety, health and working conditions are back in the news.
The new wage law is making headlines as Union Labour Minister Bhupender Yadav expressed confidence, saying the four codes could soon become a reality as about 90 percent of states have already submitted draft rules. For employees waiting for the introduction of this new wage law, it would be interesting to know that their monthly salary will decrease after the introduction of these four wage laws. While the center had planned to implement these new labor laws starting July 1, the laws have not yet gone into effect because some states have not yet set the rules for the four labor laws. The new rule requires the employee to check in 12 hours a day to make up for lost time.