7th Pay Commission latest news: REVEALED! Salary may be affected by New Wage Code - know details

7th Pay Commission latest news: Finance Minister Nirmala Sitharaman has made it clear that the center is looking to implement New Wage Code Bill 2021 from 1st April 2021. If the central government manages to do this, it will have a direct impact on the central government employees and also the private sector employees. As per the Wage Code Bill 2021, an employees monthly basic salary can't be less than 50 per cent of the net CTC. 

In other words, the New Wage Code Bill 2021 doesn't allow your allowances like Dearness Allowance (DA), House Rent Allowance (HRA), Travel Allowance (TA), etc. to be more than 50 per cent of net CTC. As per the tax and investment experts, a central government employees basic salary has direct impact on PF and Gratuity while allowance like DA, TA, HRA plays a major role in one's salary. So, a central government and private sector employees' PF, Gratuity, DA, TA, HRA, etc. will get changed if the New Wage Code 2021 is implemented from 1st April 2021.

How New Wage Code Bill will impact your PF, Gratuity

As one's monthly PF contribution and Gratuity is a part of one's monthly basic salary. If the New Wage Code Bill 2021 is implemented, it will lead to change in one's monthly PF and Gratuity contribution. However, it is yet to be seen whether the wage code gets implemented from 1st April 2021 or not as the center is yet to make any deadline for implementation of the new wage code.

On how New Wage Code Bill 2021 will impact a central government employees' Provident Fund (PF) and Gratuity; Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, "Once the New Wage Code gets implemented, one's monthly PF and Gratuity will get changed too as the monthly PF and Gratuity contribution is calculated on monthly basic plus DA. Since, both DA and basic salary will change, one's PF and Gratuity contribution is bound to change after the New Wage Act 2021 implementation."

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7th CPC Allowance

On how the New Wage Code will lead to change in the monthly allowances like DA, TA, HRA, etc. SEBI registered tax and investment expert Jitendra Solanki said, "The New Wage Code caps the allowance head at 50 per cent of the net monthly CTC, which means one's monthly allowance can't be more than 50 per cent of its net CTC. Since DA, TA, HRA, etc. fall under the allowance heads. They are bound to get affected once the New Wage Act 2021 gets implemented."

Since, the central government is in the process of finalising the wage code, it is not clear whether the monthly salary of a government or a private employee (having EPF account) will go up or down due to new monthly contribution of the PF, EPF and Gratuity, but it's for sure that one's PF, EPF and Gratuity contribution will change.