New Labour Law 2025 salary calculator: How CTC of Rs 7 lakh, Rs 10 lakh and Rs 15 lakh will change
India’s long-awaited Labour Codes finally came into effect on November 21, 2025, triggering the biggest salary restructuring shift in decades. While these reforms overhaul compliance and employment norms, the most immediate impact is on how companies structure salaries and how much employees take home each month.
- Nov 25, 2025,
- Updated Nov 25, 2025 4:05 PM IST
India’s long-awaited Labour Codes—on Wages, Social Security, Industrial Relations and Occupational Safety—came into force on November 21, 2025, triggering the biggest salary restructuring exercise the country has seen in decades. While the reforms span compliance, contracts and social security, the most visible and immediate impact is on salary structures and monthly take-home pay for nearly all salaried employees.
The reason is simple: the Labour Codes introduce a uniform definition of “wages”, dramatically altering how CTC (Cost to Company) is allocated. According to Niyati Shah, Vertical Head – Personal Tax at 1 Finance, the core of this shift is that the basic salary must now form at least 50% of total remuneration.
This single requirement changes how employers calculate PF, gratuity, allowances and take-home pay. The result: while CTC stays the same, net salary in hand reduces, and statutory savings rise.
What has changed under the new labour law?
The Wage Code states that Basic Salary + Dearness Allowance must be at least 50% of total wages. This affects most employees whose basic currently sits between 25% and 40% of CTC.
Three major consequences follow: > Basic salary increases for most workers. > PF contributions rise, because PF = 12% of Basic. > Gratuity liability increases, since gratuity is also calculated on Basic.
This creates a trade-off: lower take-home salary, higher long-term benefits.
Impact on salary: Before vs After
| CTC | Old Basic (30%) | New Basic (50%) | Employee PF Before | Employee PF After | Take-Home Before (Approx.) | Take-Home After (Approx.) | Monthly Change (Approx.) |
| 7,00,00 0 | 2,10,000 | 3,50,000 | 25,200 | 42,000 | 49,000/month | 45,500/month | 3,500 to 4,000 |
| 10,00,0 00 | 3,00,000 | 5,00,000 | 36,000 | 60,000 | 67,000/month | 62,000/month | 4,500 to 5,500 |
| 15,00,0 00 | 4,50,000 | 7,50,000 | 54,000 | 90,000 | 1,00,000/month | 94,000/month | 6,000 to 7,000 |
Why does take-home salary drop?
Even though the overall CTC figure stays exactly the same, the internal components of the salary undergo a redistribution that raises statutory deductions. Since companies must ensure that Basic pay forms at least 50% of total remuneration, most employees will see an increase in their Basic component. This automatically pushes up employee and employer PF contributions, as PF is calculated as a fixed percentage of Basic. To accommodate this higher Basic within the same CTC, allowances such as HRA, special allowance, and other flexible components shrink. Additionally, employers’ gratuity liabilities rise because gratuity is also calculated on Basic. Together, these shifts channel a larger portion of the salary into compulsory savings rather than monthly spendable income, leading to a lower take-home.
Is this bad for employees?
In the short term, the answer is largely yes—employees will notice a dip in their monthly take-home salary as more funds are diverted toward PF and future gratuity. However, from a long-term financial perspective, the impact is positive. A higher PF contribution means a steadily growing, interest-bearing retirement corpus that is both safe and tax-efficient. Increased gratuity eligibility further enhances long-term benefits, offering a larger payout after completion of the required service period. In essence, while the immediate cash in hand decreases, employees ultimately gain through stronger retirement savings, better financial discipline, and a more structured, secure compensation framework. Higher PF contributions (tax-free, interest-bearing corpus)
Higher gratuity payouts
Stronger social security protections More stable, uniform salary structures
The Codes aim to align India with global social protection standards.
What employees should do now
Check your salary breakup — If Basic Review tax planning — Changes in HRA and allowances may affect deductions. Manage cash flows carefully, especially if you have EMIs. Treat higher PF as part of retirement planning.
What employers must prepare for
> Reworking salary structures > Updating payroll software and HRMS systems > Higher PF and gratuity liabilities > Clear communication to avoid employee concerns > Companies that communicate early and honestly are likely to see smoother transitions.
The bottom line
The New Labour Laws represent a structural shift in how India compensates its workforce. While the initial reduction in take-home pay may feel challenging, the reforms strengthen long-term financial security through higher retirement savings and predictable wage structures.
Over time, the changes are expected to create a more transparent, equitable and financially resilient workforce—trading short-term discomfort for long-term stability.
India’s long-awaited Labour Codes—on Wages, Social Security, Industrial Relations and Occupational Safety—came into force on November 21, 2025, triggering the biggest salary restructuring exercise the country has seen in decades. While the reforms span compliance, contracts and social security, the most visible and immediate impact is on salary structures and monthly take-home pay for nearly all salaried employees.
The reason is simple: the Labour Codes introduce a uniform definition of “wages”, dramatically altering how CTC (Cost to Company) is allocated. According to Niyati Shah, Vertical Head – Personal Tax at 1 Finance, the core of this shift is that the basic salary must now form at least 50% of total remuneration.
This single requirement changes how employers calculate PF, gratuity, allowances and take-home pay. The result: while CTC stays the same, net salary in hand reduces, and statutory savings rise.
What has changed under the new labour law?
The Wage Code states that Basic Salary + Dearness Allowance must be at least 50% of total wages. This affects most employees whose basic currently sits between 25% and 40% of CTC.
Three major consequences follow: > Basic salary increases for most workers. > PF contributions rise, because PF = 12% of Basic. > Gratuity liability increases, since gratuity is also calculated on Basic.
This creates a trade-off: lower take-home salary, higher long-term benefits.
Impact on salary: Before vs After
| CTC | Old Basic (30%) | New Basic (50%) | Employee PF Before | Employee PF After | Take-Home Before (Approx.) | Take-Home After (Approx.) | Monthly Change (Approx.) |
| 7,00,00 0 | 2,10,000 | 3,50,000 | 25,200 | 42,000 | 49,000/month | 45,500/month | 3,500 to 4,000 |
| 10,00,0 00 | 3,00,000 | 5,00,000 | 36,000 | 60,000 | 67,000/month | 62,000/month | 4,500 to 5,500 |
| 15,00,0 00 | 4,50,000 | 7,50,000 | 54,000 | 90,000 | 1,00,000/month | 94,000/month | 6,000 to 7,000 |
Why does take-home salary drop?
Even though the overall CTC figure stays exactly the same, the internal components of the salary undergo a redistribution that raises statutory deductions. Since companies must ensure that Basic pay forms at least 50% of total remuneration, most employees will see an increase in their Basic component. This automatically pushes up employee and employer PF contributions, as PF is calculated as a fixed percentage of Basic. To accommodate this higher Basic within the same CTC, allowances such as HRA, special allowance, and other flexible components shrink. Additionally, employers’ gratuity liabilities rise because gratuity is also calculated on Basic. Together, these shifts channel a larger portion of the salary into compulsory savings rather than monthly spendable income, leading to a lower take-home.
Is this bad for employees?
In the short term, the answer is largely yes—employees will notice a dip in their monthly take-home salary as more funds are diverted toward PF and future gratuity. However, from a long-term financial perspective, the impact is positive. A higher PF contribution means a steadily growing, interest-bearing retirement corpus that is both safe and tax-efficient. Increased gratuity eligibility further enhances long-term benefits, offering a larger payout after completion of the required service period. In essence, while the immediate cash in hand decreases, employees ultimately gain through stronger retirement savings, better financial discipline, and a more structured, secure compensation framework. Higher PF contributions (tax-free, interest-bearing corpus)
Higher gratuity payouts
Stronger social security protections More stable, uniform salary structures
The Codes aim to align India with global social protection standards.
What employees should do now
Check your salary breakup — If Basic Review tax planning — Changes in HRA and allowances may affect deductions. Manage cash flows carefully, especially if you have EMIs. Treat higher PF as part of retirement planning.
What employers must prepare for
> Reworking salary structures > Updating payroll software and HRMS systems > Higher PF and gratuity liabilities > Clear communication to avoid employee concerns > Companies that communicate early and honestly are likely to see smoother transitions.
The bottom line
The New Labour Laws represent a structural shift in how India compensates its workforce. While the initial reduction in take-home pay may feel challenging, the reforms strengthen long-term financial security through higher retirement savings and predictable wage structures.
Over time, the changes are expected to create a more transparent, equitable and financially resilient workforce—trading short-term discomfort for long-term stability.