Here’s Why Your Take-home Salary is Expected to go Down From April 2021 | EXPLAINED


New Delhi: From the next financial year, the take-home salary of private-sector employees is likely to go down as companies will bring pay packages in line with the government’s new wage rules. Further, Provident Fund (PF), gratuity components will also be impacted among other things from April 2021. Also Read – Your Take-Home Salary May Reduce From April 2021 But It’s Not All Bad News

Here’s what new wage rule will translate into. Also Read – British Royal Family is Offering a Housekeeping Job at Windsor Castle & The Starting Salary is Rs 18.5 Lakh!

1) The draft rules, under Code on Wages 2019, mention that there will be a consequent rise in gratuity and provident fund (PF) contributions of the employee. However, this would result in a proportional reduction in the employee’s take-home salary. Also Read – UP School Teacher, Who Earned Over Rs 1 Crore By Working In 25 Schools, Arrested

2) Most pay structures in India Inc will change because the non-allowance part is usually less, sometimes substantially lower, than 50%, a report by ET said.

3) PF contributions will shoot up (for both employers and employees).

4) As PF will go up, take-home salary will decrease.

5) Here’s the good news: While the take-home pay will go down, the social security and post-retirement gratuity amounts will go up.

6) At present, most private companies have a higher allowance component rather than the basic salary. As a result, the new wage rules will affect private employees the most.

7) Lastly, companies may witness a rise in costs as their contribution to the PF as well as gratuity payout will increase, said the report by ET.


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