FAQs

What is the 50% rule for allowances?

If allowances and benefits (excluding gratuity and retrenchment compensation) exceed 50% of an employee’s total remuneration (CTC), the excess amount must be added back to wages for statutory calculations.

Will take-home salary reduce under the new codes?

Yes, it is expected to decrease for many employees. A higher basic pay component (50% or more) means increased provident fund (PF) and gratuity deductions, reducing the immediate monthly in-hand salary.

Are employer contributions (PF, NPS, ESI) part of "total remuneration"?

The Code uses "all remuneration," and practitioners generally include employer PF, NPS, and ESIC contributions as part of the total cost-to-company (CTC) when applying the 50% test.

Are fixed-term employees (FTE) eligible for gratuity?

Yes, FTEs are eligible for pro-rata gratuity after one year of continuous service, whereas permanent employees still require five years.

What is the new "Full and Final" settlement deadline?

Employers must settle all dues within two working days of an employee’s resignation, dismissal, or retirement.

Are gig and platform workers covered?

Yes, for the first time, digital aggregators must contribute 1–2% of their annual turnover to a social security fund for gig and platform workers.