Hi wonderful minds,
Just a clarification on the PF computation based on the new wages act - now that we need to recompute that the basic must be 50% of the total CTC - are employers mandatory need to adjust the employer PF contribution? is the maximum of Rs 1,800 fine to continue to be followed?
Thank you for your replies ..
There is no change in the PF Act as yet. So the PF can continue to be computed on Rs 15000/- if that was the practice earlier.
thank you for your input
Still on the topic of the new labor laws - can someone please share the process / procedure /guidelines on how to create a Grievance Redressal Committee - and if there is a sample policy for this that you can share would be much appreciated
@Sree
might you can help me out here
Dear Team,
Can GreyHR community will conduct any webinar session quickly on new labour code and impact on payroll so that it will be helpful to all.
Hello Team,
New Labor Laws for India
As per payroll point of view:
1)Can you please let us know any changes in Basic which is mandatory to follow?
2)Gratuity applicable one year service as compared to previous Minimum 5 Year service.
Hi @Venkata
I will share my answer to your queston based on what I learned from one webinar I attended:
Uniform definition of wages. Wages now include basic pay, dearness allowance, and retaining allowance. Exclusions include various allowances and employer contributions. However, if these excluded components exceed half of total remuneration, the excess is added back for statutory calculations (this is referred to as the “50% Rule”). This expansion of the definition for “wages” will generally result in an increase of social security contributions and gratuity pay.
Revised gratuity eligibility for fixed term employees. Employees rendering services on a fixed-term basis is now eligible to pro-rated gratuity, subject to minimum 1 year of employment.
Hope this helps!
Hi Venkata,
As per the ESIC notification for Basic Wage Calculation for eligible employees earning a monthly wage of up to Rs. 21,000 (or Rs. 25,000 for persons with disabilities).
Previously employee whose gross salary exceeds 21K were exempted. However, as per notification from ESIC wages must be 21K.
Below are the examples will help you to understand:
Example 1: Compliant Salary Structure
Basic Pay + DA + RA : Rs. 12000/-
Allowances(HRA, Conveyance, other) : Rs. 8000/-
Total Remuneration(TR) : Rs. 20000/-
50% of TR limit for exclusions: Rs. 10000/-
In this case, the actual exclusions (8,000) are less than the 50% limit (10,000).
Total ESI Wages: 12,000 (Basic + DA + Retaining Allowance)
Example 2: Non-Compliant Salary Structure
Basic Pay + DA + RA: Rs. 8000/-
Allowances (HRA, Conveyance, other) : Rs. 12000/-
Total Remuneration: Rs. 20000/-
50% of TR limit for exclusions: Rs. 10000/-
Excess Exclusions: Rs. 12000 – 10000 = Rs. 2000
Here, the actual exclusions (12,000) exceed the 50% limit (10,000) by 2,000.
This excess amount must be added back to the “wages”:
Total ESI Wages: 8,000 (Basic+DA+RA) + 2,000 (Excess Add-back) = Rs. 10,000
Example 3: Non-Compliant Salary Structure with High Allowances
Basic Pay + DA + RA : Rs. 16000/-
Allowances (HRA, Conveyance, other): Rs. 24000/-
Total Remuneration: Rs. 40000/-
50% of TR limit for exclusions: Rs. 20000/-
Excess Exclusions: Rs. 24000 – 20000 = Rs. 4000/-
Here, the actual exclusions (24,000) exceed the 50% limit (20,000) by 4,000. This excess amount must be added back to the “wages”:
Total ESI Wages: 16,000 (Basic+DA+RA) + 4,000 (Excess Add-back) =Rs. 20,000
Dear Team,
Can some one help us on new labour law code which impacts on payroll.
Hey Venkata!
The biggest shift is the 50% Wage Rule. Your Basic + DA must now be at least half your total CTC. This means higher PF and Gratuity contributions, so your monthly take-home will likely dip while your retirement savings grow. Also, companies must now settle Full & Final dues within two working days of an employee leaving.