Labor Reform 2020 | 4 New Labor Laws Combined With The Old 29 Labor Laws

 

Ever since the Narendra Modi government came, it has been known for shocking decisions. Once again, he has surprised people with jobs. In fact, the Ministry of Labour & Employment at the Center has made some major changes in the rules of salary, which will reduce your take-home salary.

 

So far there were 29 labor laws in India for employed people. The central government has made changes to reduce their number from 29 to 4. These are the laws - occupational safety law, health and working conditions, industrial relations, and social security law. From April 1, 2021, new laws will come into force and their effect on a salary of May 1, 2021, will also start showing.

 

Let's first, understand the salary structure

 

Employers are well-versed with two words, first CTC ie Cost to Company and second take home salary, also known as in-hand salary.

 

1. CTC: CTC means Cost to Company is the total expenses of the company in terms of your work; it is the total salary of an employee. This salary not only includes the basic salary of an employee but also house allowance, medical allowance, travel allowance, food allowance, and incentives. Combining all of these determines employee total salary, which is called CTC.

 

2. Take-home salary: When an employee gets a salary, it is less than your CTC. Reason- The company deducts some money from your CTC or total salary for the provident fund i.e. PF, deducts the premium of some medical insurance and in addition, some items are deducted. The money that comes into your hands after all these is your in-hand salary or takes a home salary.

 

How will your salary be reduced?

 

A person whose basic salary is 50% of CTC will not make much difference, but one whose basic salary is not 50% of CTC will make much difference. This will be because, under these rules, the basic salary of anyone can not be less than 50% of CTC.

 

Actually, PF money is deducted from your basic salary, which is 12% of your basic salary. That is, the more the basic salary, the more PF will be deducted. The earlier employee used to increase the allowance by reducing basic salary from Total CTC, which also provided tax exemption and reduced PF. This increased in-hand salary.

 

Understand the new and old rules from 100 rupees

 

Old Rule	New Rule
Basic salary Rs 40	Basic salary Rs 50  (Because it should be 50% of CTC)
Allowance Rs 60	Allowance Rs 50
PF deduct from basic salary: 12% i.e. Rs 4.8	PF deduct from basic salary: 12% i.e. Rs 6.0
Medical insurance premium and other deductions: Rs 1 (Suppose)	Medical insurance premium and other deductions: Rs 1 (Suppose)
Now you have a basic salary: Rs 40-4.8-1=34.2	Now you have a basic salary: Rs 50-6-1=43
Now in-hand salary will be Rs 60+34.2=94.20	Now in-hand salary will be Rs 50+43=93
CTC Rs 100 (Total Salary)	CTC Rs 100 (Total Salary)

 

 

Note- Medical insurance premiums and other deductions have been considered as one thousand, while this varies from company to company. It totally depends on the company's salary policy and employee class.