Labour Code Wage Calculator
Correctly work out your "wages" under the new Labour Codes' 50% rule.
Your inputs
The 50% rule (Code on Wages, 2019, Section 2(y) first proviso) is a ceiling on excluded components, not a requirement that Basic itself be 50% of your pay — a common misconception. If HRA, conveyance, bonus, and employer PF together exceed half your total pay, only the excess above that half gets added back into "wages."
"Basic must be 50% of CTC" is the wrong way to read this rule
The actual rule (Code on Wages, 2019, first proviso to Section 2(y)) is a ceiling on excluded components — HRA, conveyance, bonus, and employer PF contribution. If those together exceed half your total pay, only the amount above that half gets added back into "wages." It doesn't mean Basic itself has to be half your CTC.
| If you assumed "Basic = 50% of CTC" | ₹27,700 |
| Your actual wages under the correct test | ₹40,000 |
What this does to your gratuity
The Code on Social Security, 2020 calculates gratuity on this same revised wages figure — not the old Basic + DA convention most gratuity estimates still use. Whether this applies retrospectively to service completed before 21 November 2025 hasn't been definitively clarified — treat the multi-year figures below as the shape of the change, not a confirmed number for past service.
| Tenure | Old basis (Basic+DA only) | New basis (wages) |
|---|---|---|
| 5 years | ₹72,115 | ₹1,15,385 |
| 10 years | ₹1,44,231 | ₹2,30,769 |
| 20 years | ₹2,88,462 | ₹4,61,538 |
| 30 years | ₹4,32,692 | ₹6,92,308 |
Your per-year gratuity accrual rises by roughly 60% under the new wages figure, before the ₹20 lakh statutory ceiling is applied.
Open the Gratuity CalculatorPF: what the new ₹25,000 ceiling changes
The EPFO’s statutory wage ceiling was raised from ₹15,000 to ₹25,000 a month from 17 September 2026, and EPFO has said it is tested against “wages” as the Code on Social Security defines them, not gross salary. Above the ceiling, the contribution may be restricted to ₹25,000 unless you already contribute on higher wages. The figures below show your 12% contribution on the old vs. new wages base with no ceiling applied (matching how most private-sector PF deductions are actually run in practice) — confirm the final treatment with your employer or a payroll consultant before relying on this.
| Basis | Your 12% PF contribution |
|---|---|
| Old (Basic+DA only) | ₹3,000/month |
| New (revised wages) | ₹4,800/month |
What happens to your take-home pay?
This isn't a fixed function of your current pay slip alone — it depends on whether (and how) your employer restructures your CTC to comply. If Basic is raised to close the gap, your employee PF deduction rises and take-home falls, even though your CTC stays the same. If your employer absorbs the change elsewhere, your payslip may not move at all. Run your own numbers before and after any revised payslip through the In-hand Salary Calculator to see the real difference.
Estimates only. Figures are indicative and do not constitute financial advice.
About the Labour Code Wage Calculator
India's four new Labour Codes took effect on 21 November 2025, and the single most misunderstood part is the "50% rule" — most explainers (and most people) read it as "your Basic salary must be at least 50% of your CTC." That's not what the law actually says, and getting it wrong changes your PF and gratuity numbers. The real rule, from the first proviso to Section 2(y) of the Code on Wages, 2019, is a ceiling on the components the law excludes from "wages" — HRA, conveyance, bonus, and your employer's PF contribution. If those excluded components together add up to more than half your total pay, only the amount above that half gets added back into your "wages" — Basic itself doesn't need to be anything in particular.
This calculator runs the actual test: enter your Basic, special allowance, HRA, conveyance, bonus, and the employer PF contribution your CTC shows, and it tells you your correct "wages" figure under the new definition — plus what the common (wrong) "Basic = 50%" shortcut would have told you instead, so you can see exactly where the two diverge. Below the main result, it also shows what this does to your gratuity accrual (which uses this same wages figure under the Code on Social Security, 2020) and your PF contribution, since a bigger wages number pushes both up even when your CTC doesn't change at all.
Two things this calculator is deliberately upfront about. On PF, the statutory wage ceiling was raised from ₹15,000 to ₹25,000 a month from 17 September 2026, and EPFO has said the ceiling is tested against "wages" as the Code on Social Security defines them, not gross salary — but above the ceiling, whether PF is paid on your full wages or only up to ₹25,000 still depends on your employer's arrangement, so the PF figure here is shown with no ceiling applied. On gratuity, whether the revised basis applies retrospectively to service completed before 21 November 2025 is still unresolved. Treat the PF and long-tenure gratuity figures here as illustrating the mechanism, not a final, confirmed number — confirm the actual treatment with your employer or a payroll consultant.
How to use this calculator
- Enter your monthly Basic salary (+ DA, if any).
- Enter your special allowance and any other included allowances.
- Enter your HRA, conveyance allowance, bonus/commission, and the employer PF contribution shown in your CTC.
- See your correct wages figure under the new definition, and what it does to your gratuity and PF.
Frequently asked questions
›Does the 50% rule mean my Basic salary must be at least 50% of my CTC?
No — that's the most common misreading of the rule. The actual test caps the excluded components (HRA, conveyance, bonus, employer PF) at 50% of total pay; if they exceed that, only the excess gets added back into wages. Basic itself isn't required to be any specific percentage.
›When did the new Labour Codes take effect?
The four unified Labour Codes, consolidating 29 existing labour laws, came into force on 21 November 2025.
›Does this change my PF contribution?
It can, since a higher "wages" figure means 12% is calculated on a larger base. The statutory wage ceiling was raised from ₹15,000 to ₹25,000 a month from 17 September 2026; above it, EPFO says the contribution may be restricted to the ceiling unless you already contribute on higher wages. Confirm which applies with your employer or a payroll consultant.
›Does this change my gratuity?
Yes, in principle — the Code on Social Security, 2020 calculates gratuity on this same revised wages figure rather than the old Basic + DA convention, which can meaningfully raise the accrual. Whether this applies retrospectively to service completed before 21 November 2025 is still unresolved.
›Will my take-home pay change because of this?
It depends entirely on whether and how your employer restructures your CTC in response — if Basic is raised to close the gap, your PF deduction rises and take-home falls even though CTC stays the same; if your employer absorbs the change elsewhere, your payslip may not move at all.
What affects labour code wage?
- Excluded components as a share of total pay
- Only matters once HRA, conveyance, bonus, and employer PF together exceed 50% of your total remuneration — below that threshold, the rule doesn't change anything.
- Special allowance
- Not on the law's exclusion list, so it counts as "wages" by default — a large special allowance (a common way companies historically kept Basic low) now adds directly to your wages figure.
- Employer's restructuring choice
- Your CTC total doesn't have to change, but how your employer reallocates it between components determines whether your take-home, PF, and gratuity actually move.
Related calculators
Read the full guide
The Labour Code "50% Rule" Everyone Is Explaining Wrong