New Labour Codes Will Reshape Your Take-Home Salary: Here’s How Much You’ll Actually Get on a ₹5–20 Lakh CTC

India’s salary structures are set for one of the biggest overhauls in decades. Starting November 21, 2025, the four Labour Codes—on wages, social security, industrial relations and occupational safety—will finally be implemented nationwide.

Among the many changes, one provision stands out for salaried professionals: the rule that basic salary must be at least 50% of the employee’s Cost-to-Company (CTC).

For years, most companies have kept basic salary low—typically 30% to 40% of CTC—to reduce statutory contributions like PF, gratuity and NPS. The new rule disrupts this structure and brings a uniformity that will significantly impact everyone’s take-home pay.

So, how will your in-hand salary change? What will actually happen to employees earning ₹5 lakh, ₹8 lakh, ₹15 lakh or ₹20 lakh CTC? Let’s break it down clearly.

New Labour Codes Will Reshape Your Take-Home Salary: Here’s How Much You’ll Actually Get on a ₹5–20 Lakh CTC

What Exactly Is Changing?

1. Basic Salary Will Increase for Many Employees

If your current salary structure includes a basic salary of less than 50% of your CTC, your employer will have to revise it upward.

Example:
If your CTC is ₹10,00,000 and your current basic salary is ₹4,00,000 (40%), it will be increased to at least ₹5,00,000 (50%).

2. Higher Basic = Higher Mandatory Deductions

The following contributions are all linked to basic salary:

  • EPF (Employee Provident Fund) – 24% of basic

  • NPS (Employer contribution) – 14% of basic

  • Gratuity – 4.81% of basic

As basic salary increases, all these contributions increase too.
Your take-home salary, therefore, goes down.

3. CTC Remains the Same

Despite structural changes, your total CTC does not change.
Only distribution of CTC changes.

4. Employees With 50% Basic Already—No Impact

If your employer already gives 50% basic, nothing changes in your net pay.

Key Assumptions Used in the Salary Calculations

For uniformity, the following assumptions have been taken:

  • Employee opts for the new tax regime

  • No DA or special allowances included in CTC

  • Employer contribution towards:

    • NPS: 14% of basic

    • EPF: 24% of basic

    • Gratuity: 4.81% of basic

  • Current basic salary = 40% of CTC

  • After labour code = 50% of CTC

Let’s now look at real examples for various CTC levels.

Take-Home Salary Comparison (Before vs After Labour Codes)

1. Annual CTC: ₹5,00,000

Before (Basic = 40% of CTC)

Component Amount (₹)
CTC 5,00,000
Basic Pay 2,00,000
PF (24%) 48,000
Gratuity (4.81%) 9,620
NPS (14%) 28,000
In-Hand Salary 4,14,380

After (Basic = 50% of CTC)

Component Amount (₹)
Basic Pay 2,50,000
PF (24%) 60,000
Gratuity 12,025
NPS 35,000
In-Hand Salary 3,92,975

Difference: –₹21,405 per year

2. Annual CTC: ₹8,00,000

Before

Component Amount (₹)
Basic Pay 3,20,000
PF 76,800
Gratuity 15,392
NPS 44,800
In-Hand Salary 6,63,008

After

Component Amount (₹)
Basic Pay 4,00,000
PF 96,000
Gratuity 19,240
NPS 56,000
In-Hand Salary 6,28,760

Difference: –₹34,248 per year

3. Annual CTC: ₹15,00,000

Before

Component Amount (₹)
Basic Pay 6,00,000
PF 1,44,000
Gratuity 28,860
NPS 84,000
In-Hand Salary 12,43,140

After

Component Amount (₹)
Basic Pay 7,50,000
PF 1,80,000
Gratuity 36,075
NPS 1,05,000
In-Hand Salary 11,78,925

Difference: –₹64,215 per year

4. Annual CTC: ₹20,00,000

Before

Component Amount (₹)
Basic Pay 8,00,000
PF 1,92,000
Gratuity 38,480
NPS 1,12,000
In-Hand Salary 16,57,520

After

Component Amount (₹)
Basic Pay 10,00,000
PF 2,40,000
Gratuity 48,100
NPS 1,40,000
In-Hand Salary 15,71,900

Difference: –₹85,620 per year

Why Does Take-Home Salary Fall?

The core reason is simple:

Higher Basic Salary = Higher Mandatory Deductions

Here’s what rises:

  1. EPF contribution

  2. Employer contribution to NPS

  3. Gratuity payment

These amounts are deducted from CTC before reaching your hands.

While it may feel like a pay cut, you're not actually losing money—
you’re saving more in long-term retirement funds.

But There Are Big Advantages Too

Even though in-hand salary decreases, your financial security strengthens.

1. Bigger Retirement Corpus

Your EPF and NPS balances will grow faster due to higher contributions.

2. Larger Gratuity Payout

Employees receive higher gratuity when they switch jobs or retire.

3. Improved Loan Eligibility

Banks often evaluate eligibility based on basic salary. A higher basic improves your:

  • Home loan limit

  • Car loan approval

  • Personal loan eligibility

4. More Tax Benefits

Contributions to:

  • EPF

  • NPS

  • Gratuity

are all eligible for tax deductions.

Who Will See No Impact?

You won’t see a reduction in your in-hand salary if:

✔ Your employer already pays 50% basic salary

✔ Your EPF contribution is capped at ₹1,800 per month

Many startups and private companies do this to reduce deductions.

Who Will See the Biggest Impact?

Employees earning:

  • High CTC packages

  • With low basic salary now

  • With full PF contribution (not capped)

  • With corporate-funded NPS

will see the most visible drop in take-home.

For example, someone earning ₹20 lakh CTC with full PF + NPS contributions will lose ₹7,100 per month in take-home pay.

Why Is the Government Making This Change?

The idea behind the new rule is not to reduce take-home salary but to:

  • Protect employees’ retirement savings

  • Standardize salary structures across industries

  • Prevent companies from manipulating allowances to reduce PF liability

  • Ensure social security benefits for workers in both organised and unorganised sectors

The Ministry of Labour and Employment has clarified that the rules apply to all employers and employees across sectors.

Practical Steps Employees Should Take Now

Here’s what you should do before November 2025:

1. Request a revised salary structure from HR

Ask them how your basic, PF and NPS will change.

2. Recalculate your monthly budget

Prepare for a possible lower take-home amount.

3. Adjust SIPs, EMI plans and saving goals

So that you don’t face cash-flow issues.

4. Check if PF is capped at ₹1,800

If yes, your take-home impact remains small.

5. Increase your emergency fund

Because your ready cash will reduce.

Final Takeaway

The new labour codes aim to bring discipline, transparency and long-term financial protection for India’s workforce. For many employees, take-home salary will decline—but social security contributions will rise significantly.

If you’re earning between ₹5 lakh and ₹20 lakh, these changes will affect you.
While your monthly cash in hand may drop, your retirement corpus, gratuity, and NPS balance will grow faster than before.

In short:

Short-term discomfort → Long-term financial stability

As the deadline approaches, employees should proactively understand the impact, talk to HR and adjust their personal financial planning accordingly.

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