Myth busted: How your salary has changed under new labour codes vs EPF Scheme 2026
India's new labour codes and the EPF Scheme, 2026 have triggered confusion over whether employees' salaries and provident fund contributions have changed. While the labour codes restructure wages and statutory benefits, the EPF Scheme mainly updates procedural and compliance rules without altering the basic contribution framework.
- Jul 11, 2026,
- Updated Jul 11, 2026 11:47 AM IST
India's new labour codes and the EPF Scheme, 2026 are often being confused, even though they address different aspects of employee compensation. While the labour codes redefine wages and can alter salary structures by increasing basic pay and statutory benefits, the new EPF Scheme primarily introduces procedural changes to provident fund contributions and payroll compliance. Here's what has actually changed — and what remains the same.
New labour codes
The biggest change under India's four labour codes is the introduction of a uniform definition of wages, effective from November 21, 2025. Under the Code on Wages, 2019, basic salary, dearness allowance (DA) and retaining allowance must together account for at least 50% of an employee's total remuneration.
Earlier, many companies kept the basic salary low and increased allowances such as HRA, travel and special allowances to maximise employees' monthly take-home pay. Under the new framework, this is no longer possible. If excluded allowances exceed 50% of total remuneration, the excess is added back to wages for calculating statutory benefits.
The result is a revised salary structure without changing the employee's overall Cost to Company (CTC). Employees whose basic pay was below the 50% threshold are likely to see higher basic salaries, increased EPF deductions and larger gratuity benefits.
MUST READ: TCS aligns salary structures with new India Labour Code requirements: What it means for employees
MUST READ: West Bengal government set to implement Labour Codes
While the higher statutory deductions may slightly reduce monthly take-home salary, they also improve long-term retirement savings. The reforms aim to strengthen social security, improve transparency and create a uniform wage definition across industries.
New Labour Codes – Key Changes
| Parameter | Before | After the New Labour Codes |
| Wage definition | Multiple definitions under different labour laws | Uniform definition of "wages" across labour codes |
| Basic salary | Could be 30-40% of CTC | Must be at least 50% of total remuneration |
| Allowances | Could exceed 50% of salary | Excess over 50% added back to wages |
| Provident Fund (PF) | Based on lower basic salary in many cases | Higher basic salary may increase PF contributions |
| Gratuity | Lower due to lower basic pay | Higher gratuity as it is linked to wages |
| Take-home salary | Generally higher | May reduce slightly because of higher statutory deductions |
| Overall CTC | As per employer policy | No change in total CTC; only salary structure changes |
| Main objective | Flexible salary structuring | Improve social security, transparency and retirement savings |
EPF Scheme 2026
The Employees' Provident Fund (EPF) Scheme, 2026, notified on June 29 under the Code on Social Security, 2020, does not overhaul the existing contribution system.
A common misconception is that PF contributions above ₹1,800 per month have only now become voluntary. In reality, contributions on wages above the statutory wage ceiling of ₹15,000 per month have been voluntary since the Employees' Provident Funds Scheme, 1952.
MUST READ: EPFO to credit 8.25% EPF interest for FY26 by July 15; Rs 1.44 lakh crore to reach 34 crore accounts
The key reform is that the new scheme explicitly allows either the employer or the employee to independently discontinue or reduce voluntary PF contributions above the statutory ceiling. Previously, exiting such arrangements generally depended on mutual consent or legal interpretation.
The scheme also aligns EPF calculations with the new wage definition under the labour codes. The contribution base shifts from the earlier concept of "basic wages" to the broader definition of "wages" under the Code on Social Security, incorporating the 50% wage rule.
EPF Scheme, 2026 – Key Changes
| Parameter | Earlier | EPF Scheme, 2026 |
| Mandatory EPF contributions | Existing rules under EPF Scheme, 1952 | No change in the core contribution framework |
| Voluntary PF contributions | Exiting voluntary contributions required mutual agreement or legal interpretation | Employer or employee can independently discontinue or reduce voluntary contributions above the wage ceiling |
| Wage definition | Based on "basic wages" | Linked to the broader definition of "wages" under the Code on Social Security |
| Employer's matching contribution | Often assumed for voluntary PF | Additional employer contribution is optional unless required by contract or company policy |
| Payroll reporting | Existing reporting formats | Statutory and voluntary PF contributions must be reported separately in payroll and Form V |
| Compliance | Standard EPF filings | Greater payroll transparency and compliance requirements |
| Main objective | Provident fund administration | Clarify voluntary PF rules and streamline compliance |
Another clarification is that employers are not automatically required to match an employee's additional voluntary PF contribution unless such an obligation exists under the employment contract or company policy.
To improve transparency, employers must separately report statutory and voluntary PF contributions in payroll records, electronic remittances and the newly introduced Form V return.
What changes for employees?
| Aspect | Before | After |
| Basic salary | Often 30-40% of CTC | Minimum 50% of total remuneration |
| Allowances | Could exceed 50% of salary | Excess added back to wages |
| PF contribution | Lower if basic salary was low | May increase due to higher wage component |
| Gratuity | Lower | Higher |
| Monthly take-home | Higher | May reduce slightly |
| Retirement savings | Lower | Higher |
The bottom line
The two reforms complement each other but address different issues. The new labour codes primarily affect salary structure by increasing the wage component used for calculating PF and gratuity, which may reduce monthly take-home pay while improving retirement benefits. The EPF Scheme, 2026, on the other hand, focuses on streamlining provident fund administration, clarifying voluntary contribution rules and strengthening payroll compliance rather than changing mandatory contribution rates. Together, they modernise India's wage and social security framework without altering employees' overall CTC.
MUST READ: EPFO 3.0 myths vs facts: No launch date yet, no new withdrawal limit declared
India's new labour codes and the EPF Scheme, 2026 are often being confused, even though they address different aspects of employee compensation. While the labour codes redefine wages and can alter salary structures by increasing basic pay and statutory benefits, the new EPF Scheme primarily introduces procedural changes to provident fund contributions and payroll compliance. Here's what has actually changed — and what remains the same.
New labour codes
The biggest change under India's four labour codes is the introduction of a uniform definition of wages, effective from November 21, 2025. Under the Code on Wages, 2019, basic salary, dearness allowance (DA) and retaining allowance must together account for at least 50% of an employee's total remuneration.
Earlier, many companies kept the basic salary low and increased allowances such as HRA, travel and special allowances to maximise employees' monthly take-home pay. Under the new framework, this is no longer possible. If excluded allowances exceed 50% of total remuneration, the excess is added back to wages for calculating statutory benefits.
The result is a revised salary structure without changing the employee's overall Cost to Company (CTC). Employees whose basic pay was below the 50% threshold are likely to see higher basic salaries, increased EPF deductions and larger gratuity benefits.
MUST READ: TCS aligns salary structures with new India Labour Code requirements: What it means for employees
MUST READ: West Bengal government set to implement Labour Codes
While the higher statutory deductions may slightly reduce monthly take-home salary, they also improve long-term retirement savings. The reforms aim to strengthen social security, improve transparency and create a uniform wage definition across industries.
New Labour Codes – Key Changes
| Parameter | Before | After the New Labour Codes |
| Wage definition | Multiple definitions under different labour laws | Uniform definition of "wages" across labour codes |
| Basic salary | Could be 30-40% of CTC | Must be at least 50% of total remuneration |
| Allowances | Could exceed 50% of salary | Excess over 50% added back to wages |
| Provident Fund (PF) | Based on lower basic salary in many cases | Higher basic salary may increase PF contributions |
| Gratuity | Lower due to lower basic pay | Higher gratuity as it is linked to wages |
| Take-home salary | Generally higher | May reduce slightly because of higher statutory deductions |
| Overall CTC | As per employer policy | No change in total CTC; only salary structure changes |
| Main objective | Flexible salary structuring | Improve social security, transparency and retirement savings |
EPF Scheme 2026
The Employees' Provident Fund (EPF) Scheme, 2026, notified on June 29 under the Code on Social Security, 2020, does not overhaul the existing contribution system.
A common misconception is that PF contributions above ₹1,800 per month have only now become voluntary. In reality, contributions on wages above the statutory wage ceiling of ₹15,000 per month have been voluntary since the Employees' Provident Funds Scheme, 1952.
MUST READ: EPFO to credit 8.25% EPF interest for FY26 by July 15; Rs 1.44 lakh crore to reach 34 crore accounts
The key reform is that the new scheme explicitly allows either the employer or the employee to independently discontinue or reduce voluntary PF contributions above the statutory ceiling. Previously, exiting such arrangements generally depended on mutual consent or legal interpretation.
The scheme also aligns EPF calculations with the new wage definition under the labour codes. The contribution base shifts from the earlier concept of "basic wages" to the broader definition of "wages" under the Code on Social Security, incorporating the 50% wage rule.
EPF Scheme, 2026 – Key Changes
| Parameter | Earlier | EPF Scheme, 2026 |
| Mandatory EPF contributions | Existing rules under EPF Scheme, 1952 | No change in the core contribution framework |
| Voluntary PF contributions | Exiting voluntary contributions required mutual agreement or legal interpretation | Employer or employee can independently discontinue or reduce voluntary contributions above the wage ceiling |
| Wage definition | Based on "basic wages" | Linked to the broader definition of "wages" under the Code on Social Security |
| Employer's matching contribution | Often assumed for voluntary PF | Additional employer contribution is optional unless required by contract or company policy |
| Payroll reporting | Existing reporting formats | Statutory and voluntary PF contributions must be reported separately in payroll and Form V |
| Compliance | Standard EPF filings | Greater payroll transparency and compliance requirements |
| Main objective | Provident fund administration | Clarify voluntary PF rules and streamline compliance |
Another clarification is that employers are not automatically required to match an employee's additional voluntary PF contribution unless such an obligation exists under the employment contract or company policy.
To improve transparency, employers must separately report statutory and voluntary PF contributions in payroll records, electronic remittances and the newly introduced Form V return.
What changes for employees?
| Aspect | Before | After |
| Basic salary | Often 30-40% of CTC | Minimum 50% of total remuneration |
| Allowances | Could exceed 50% of salary | Excess added back to wages |
| PF contribution | Lower if basic salary was low | May increase due to higher wage component |
| Gratuity | Lower | Higher |
| Monthly take-home | Higher | May reduce slightly |
| Retirement savings | Lower | Higher |
The bottom line
The two reforms complement each other but address different issues. The new labour codes primarily affect salary structure by increasing the wage component used for calculating PF and gratuity, which may reduce monthly take-home pay while improving retirement benefits. The EPF Scheme, 2026, on the other hand, focuses on streamlining provident fund administration, clarifying voluntary contribution rules and strengthening payroll compliance rather than changing mandatory contribution rates. Together, they modernise India's wage and social security framework without altering employees' overall CTC.
MUST READ: EPFO 3.0 myths vs facts: No launch date yet, no new withdrawal limit declared