• What is the new labor law?


• If more PF is deducted while getting salary, will the salary decrease?


• What does the rule say?

New on 21 November 2025 by Central Govt Labor Code applied. Since then, many employers have worried that their take-home pay will decrease. This fear arose because one of their rules stated that the basic pay and its components should be at least half of the total pay. People thought that if the basic salary increased, the Provident Fund (PF) deduction would also increase, thereby reducing the take-home pay.

Ministry of Labor assures

The Union Ministry of Labor and Employment has now allayed the fear of salary cuts among employees. He has said that this fear is misplaced. This week, ministry officials said the new codes would not automatically reduce anyone’s take-home pay. This is mainly due to how the PF is calculated.

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Understand the math behind PF calculation

Even if the employee’s basic salary increases under the new pay structure, the PF contribution will remain at the current statutory limit of ₹15,000, unless both the employer and the employee voluntarily opt to calculate the PF at a higher amount. This limit applies to most employed persons. As long as the PF limit is ₹15,000, the monthly deduction will remain the same. The ministry stressed that nothing in the new law compels PF calculation to be based on the entire salary.

Understand the example

To make it easier to understand, the Ministry gave a simple example. Suppose an employee Monthly salary is ₹60,000. If the salary consists of ₹20,000 as basic salary and dearness allowance and the remaining ₹40,000 as allowances, the PF calculation will still be based on ₹15,000, unless the employee opts for a higher PF base. As per the old rules and the new code, the PF contribution remains the same. Employer contributes ₹1,800 and employee also contributes ₹1,800. This leaves the salary of ₹56,400 unchanged.

Relief to concerned employees

The government’s clarification has come as a major relief to anxious employees, who were worried that the new wage definition would reduce their expendable income. The ministry has said that the revised structure is not intended to reduce pay but to bring uniformity and clarity.

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