Are your salary structures ready for the "50% Basic Pay" rule under the new Social Security Code?

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Asked by Kavya Sharma on
With the 2020 Labor Codes officially notified (effective Nov 21, 2025), many companies are struggling to balance the new "Wages" definition. If your allowances exceed 50% of the Gross Salary, the excess is now added back to "Wages" for PF and ESI calculations. How are you managing the resulting increase in CTC and the dip in employee take-home pay?
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#Newlabourcodes #Socialsecuritycode #Salarystructuring #Hrcompliance2026

1 Answer

Most organizations are moving toward a 50-50 split (Basic+DA vs. Allowances). While this increases the employer's statutory liability (higher PF and Gratuity provisioning), it also ensures long-term social security for the employee. The key is to communicate this as a 'Wealth Creation' shift rather than a 'Take-home cut.' We recommend a shadow payroll run before the next appraisal cycle to identify the exact impact on your bottom line.
Answered by DCPS Admin Verified Expert •

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