The four Labour Codes came into force on 21 November 2025, and with them a single definition of "wages" that decides your PF, gratuity and other statutory dues. If your basic pay + DA is less than half of your pay, part of your allowances is now counted as wages. This labour code salary calculator shows what that does to your salary, line by line, on the same CTC.
Enter your monthly basic + DA, HRA and other allowances, choose whether PF is on full wages or capped at the PF wage ceiling (Rs 25,000 from 17 September 2026), and see an old-rules vs Labour Codes table: employee PF, employer PF, gratuity, CTC and take-home before tax. You can also see what happens if your employer keeps your pay unchanged and absorbs the extra cost instead.
Reviewed by: CalcMojo Editorial Team
The 50% wages rule in plain words
The Code on Wages, 2019 (section 2(y)) and the Code on Social Security, 2020 (section 2(88)) define wages the same way. Wages include basic pay, dearness allowance and retaining allowance. They exclude a list of payments, including HRA, conveyance allowance, bonus, overtime, commission, the employer's PF and pension contributions, gratuity and retrenchment compensation.
The catch is the first proviso: if the excluded payments in items (a) to (i) of that list add up to more than half of all remuneration, the amount above half is added back to wages. In effect:
Wages = the higher of (basic + DA + retaining allowance) or 50% of total remuneration
The Ministry of Labour and Employment's FAQs (30 December 2025) give an example where Rs 2,000 of allowances above the 50% mark is added to basic + DA of Rs 20,000, so statutory calculations are made on Rs 22,000. Its Additional FAQs (16 March 2026) say that the employer's PF and pension contributions and statutory bonus count in total remuneration for this test, while gratuity and ESI do not, and that overtime counts too. The first FAQs also say performance-linked incentives, ESOPs, the variable part of pay and reimbursements are not part of wages.
What changes for PF and gratuity
- PF. Contributions are a percentage of wages. If wages go up, both your PF and your employer's PF go up, unless your PF is capped at the wage ceiling and your basic + DA is already above it.
- Gratuity. Gratuity is 15 days' wages for every completed year of service, worked out as last monthly wages / 26 x 15 x years, up to Rs 20 lakh. A higher wage figure means a bigger gratuity. The Ministry's FAQs say the new definition applies from 21 November 2025 and that gratuity is paid on the wages last drawn, so it applies to your whole service, not just the years after the Codes.
- Take-home. Your own PF deduction rises, so take-home falls. If your employer holds your CTC fixed, the extra employer PF and gratuity also come out of your allowances, so take-home falls further.
How the calculator works
Old rules: PF and gratuity are both worked out on basic + DA. (The old EPF Act counted basic + DA + retaining allowance as basic wages, and the Payment of Gratuity Act used basic + DA.)
Labour Codes: the tool finds wages as the higher of basic + DA and half of total remuneration, where total remuneration = basic + DA + HRA + other allowances + employer PF. Because employer PF itself depends on wages, the tool solves this by repeating the calculation until it settles (it takes only a few rounds).
Same CTC: the tool finds the largest gross pay whose total cost (gross + employer PF + gratuity accrual, if gratuity is in your CTC) still equals your old CTC. Basic + DA is never cut. The reduction comes out of "other allowances" first, then HRA.
Same pay: gross pay stays as it is, and the tool shows how much more your employer spends in a year.
Monthly gratuity accrual is wages x 15 / 26 / 12, about 4.81% of wages. EDLI and PF administration charges are left out because they are small and vary.
Worked example with the default numbers
Monthly pay: basic + DA Rs 30,000, HRA Rs 15,000, other allowances Rs 35,000. Gross Rs 80,000. PF at 12% on full wages, gratuity inside CTC, employer keeps CTC the same.
| Monthly | Old rules | Labour Codes |
|---|---|---|
| Wages for PF and gratuity | Rs 30,000 | Rs 41,523 |
| Employee PF | Rs 3,600 | Rs 4,983 |
| Employer PF | Rs 3,600 | Rs 4,983 |
| Gratuity accrual | Rs 1,442 | Rs 1,996 |
| Gross pay | Rs 80,000 | Rs 78,063 |
| Take-home before tax | Rs 76,400 | Rs 73,080 |
| Monthly CTC | Rs 85,042 | Rs 85,042 |
Basic + DA is only 37.5% of pay, so about Rs 11,523 of allowances is added back. Take-home falls by Rs 3,320 a month (Rs 39,840 a year). In return, your PF account gets Rs 33,192 more a year (both shares together), and gratuity after 10 years rises from Rs 1,73,077 to Rs 2,39,555.
Same salary, PF capped at Rs 25,000. Because basic + DA (Rs 30,000) is already above the ceiling, PF stays at Rs 3,000 + Rs 3,000 before and after. Only the gratuity accrual rises, and take-home falls by just Rs 540 a month.
Same salary, employer keeps your pay. Wages become Rs 42,553 and PF Rs 5,106 each side. Your take-home falls by Rs 1,506 (your own extra PF) and your employer spends about Rs 25,314 more a year.
PF wage ceiling: Rs 15,000 or Rs 25,000?
The Union Cabinet approved raising the EPFO wage ceiling from Rs 15,000 to Rs 25,000 per month with effect from 17 September 2026, and the Ministry of Labour notified it in the Gazette (S.O. 5109(E)) under the Code on Social Security. It was the first change since September 2014. Employees earning between Rs 15,000 and Rs 25,000 now come under mandatory coverage, and the maximum employer contribution to the pension scheme (8.33%) rises from Rs 1,250 to Rs 2,083 a month.
The tool defaults to Rs 25,000 and lets you pick Rs 15,000 (for pay periods up to 16 September 2026) or any other figure. The same ceiling is used in both columns so the table isolates the effect of the new wages definition.
PF on the ceiling or on full wages?
Many employers deduct PF only on wages up to the ceiling once an employee earns more than that. Others contribute on the full basic. Which applies to you depends on your employer's policy and the options you and your employer have chosen under the scheme, so check your pay slip: if PF is 12% of Rs 25,000 (Rs 3,000) or of Rs 15,000 (Rs 1,800) while your basic is higher, you are on the capped basis.
The choice matters a lot. On the capped basis, higher-paid employees whose basic + DA is above the ceiling see no PF change at all, only higher gratuity. On full wages, PF rises with every rupee added back.
PF rate: 12% or 10%?
Section 16 of the Code on Social Security sets the base rate at 10% of wages, rising to 12% for establishments the Central Government notifies. Most establishments contribute 12%, the rate used by the EPF calculator. Some smaller or specified units pay 10%. Pick the rate on your pay slip.
Points to keep in mind
- Tax is not included. Take-home here is gross pay minus your PF only. Run the new gross through the salary calculator or income tax calculator for after-tax pay. Your own PF contribution can lower your tax under the old regime.
- Your employer may restructure differently, for example by raising basic pay to 50% instead of relying on the add-back. For PF and gratuity the result is the same, because the wage figure is the same, but your HRA exemption and other tax figures can change.
- Some allowances were already counted. In 2019 the Supreme Court held that special allowances paid to all employees across the board form part of basic wages for PF. If your employer already followed that, your "old rules" PF may already be higher than shown.
- Gratuity eligibility. Five years of continuous service is needed in most cases. Fixed-term employees qualify after one year, and the five-year condition does not apply on death or disablement.
For the payout itself, try the gratuity calculator. If you are a Central Government employee, the DA calculator shows how DA hikes raise basic + DA, which also raises PF and gratuity.
Frequently asked questions
When did the new labour codes come into effect?
All four Labour Codes, including the Code on Wages, 2019 and the Code on Social Security, 2020, came into force on 21 November 2025.
What is the 50% wages rule?
Wages include basic pay, DA and retaining allowance. If excluded payments such as HRA, conveyance, overtime, commission and the employer's PF contribution add up to more than half of total remuneration, the part above half is added back to wages for PF, gratuity and other statutory purposes.
Will my take-home salary go down under the new labour code?
Only if your basic + DA is below half of your pay. Your PF deduction rises, and if your employer keeps CTC fixed, the extra employer PF and gratuity cost also comes out of your allowances. With the defaults in this tool, take-home falls by Rs 3,320 a month on PF calculated on full wages, or Rs 540 on PF capped at Rs 25,000.
Is the PF wage ceiling now Rs 25,000?
Yes. The Cabinet approved raising it from Rs 15,000 to Rs 25,000 per month from 17 September 2026, notified as S.O. 5109(E). The maximum employer contribution to the pension scheme rises to Rs 2,083 a month.
Does the employer's PF count in total remuneration for the 50% test?
Yes. The Ministry of Labour's Additional FAQs of 16 March 2026 say employer PF and pension contributions and statutory bonus are included, while gratuity and ESI are not.
Does the new wages definition apply to gratuity for past years?
Gratuity is paid on the wages last drawn when it falls due. The Ministry's FAQs say the new definition applies from 21 November 2025, so gratuity paid on or after that date uses the new wages for the whole period of service.
What is the maximum gratuity under the Code on Social Security?
The ceiling is the amount notified by the Central Government, currently Rs 20 lakh according to the Ministry of Labour's FAQs.
Are bonus and incentives part of wages?
No. Bonus is an excluded item, and the Ministry's FAQs say performance-linked incentives, ESOPs, the variable part of pay and reimbursements are not wages. Statutory bonus still counts in total remuneration for the 50% test. ---
Sources & Methodology
- The Code on Wages, 2019 (Ministry of Labour and Employment) — section 2(y) definition of wages and the 50% proviso
- The Code on Social Security, 2020 (Ministry of Labour and Employment) — section 2(88) wages, section 16 PF rates (10% / 12%), section 53 gratuity (15 days' wages, monthly wages / 26 x 15)
- PIB backgrounder, 21 November 2025: India's Labour Reforms — the four Codes and their implementation
- MoLE FAQs on Labour Codes, 30 December 2025 — wages examples, exclusions (incentives, ESOPs, reimbursements), gratuity from 21.11.2025, Rs 20 lakh gratuity cap
- MoLE Additional FAQs on Labour Codes, 16 March 2026 — employer PF and statutory bonus included in total remuneration, gratuity and ESI excluded, overtime included, gratuity on last drawn wages, fixed-term employees after one year
- MoLE / PIB, 16 September 2026: Cabinet approves EPFO wage ceiling of Rs 25,000 — ceiling raised from Rs 15,000 to Rs 25,000 from 17 September 2026
- PIB, 23 September 2026: EPFO Berhampore on the revised ceiling — Gazette notification S.O. 5109(E); EPS maximum Rs 2,083
- MoLE Compliance Handbook for Employers under the four Labour Codes — gratuity conditions and payment rules
- Methodology: wages = max(basic + DA, 50% of [basic + DA + allowances + employer PF]), solved by iteration. PF rounded to the nearest rupee. Gratuity accrual = wages x 15 / 26 / 12. Same-CTC case: largest gross pay whose total employer cost does not exceed the old CTC, with allowances cut ("other" first, then HRA). The Gazette text of S.O. 5109(E) itself was not opened; the ceiling, date and notification number come from the Ministry and PIB releases above.
This calculator gives estimates based on the Labour Codes, Ministry of Labour FAQs and EPFO notifications as of November 2026. It does not include income tax, professional tax, ESI, EDLI or admin charges. Your employer's payroll and the final Central and State rules decide the actual figures. ---
Data accurate as of: November 2026