What is the New-Wage bill?

What is the New-Wage bill?

New Wage bill

Central Government has decided to introduce New Wage Code Bill 2021 from the financial year April 1, 2021. The Bill has a direct effect on the salary of government employees, gratuity, and provident fund. Basically, the bill contains three components, i.e.,

  • Basic pay

  • Dearness allowance

  • Retention payment

Whereas the code of wages proposes to influence salaries paid to employees, it is necessary to know that some wages aren’t included such as:

  • Pension and PF contribution 

  • Bonuses

  • HRA 

  • Overtime

  • Gratuity

  • Commission retrenchment compensation. 

What are the impacts of the New-Wage Code Bill 2021?

1.    Shift in PF Contribution:

PF contribution is calculated by the basic salary and dearness allowance. with the introduction of the code, the PF contribution of employees will also change.

2.    Gratuity:

The code enables the employees to claim gratuity after spending a year at an organization, as opposed to the previous laws, which permitted gratuity after 5 years. The gratuity will be calculated by including basic pay, special allowance, travel, etc., increasing the gratuity value.

3.    Hike in DA:

The central government has planned to increase the dearness allowance by 4%. 

4.    Basic pay:

It will become compulsory that basic pay accounts for 50% of an employee’s net CTC.

5.    Allowances:

House rent allowance, conveyance allowance, leave travel allowance, overtime allowance will be capped to the remaining 50% of your CTC.


The increase in PF contribution, gratuity doesn’t mean you will receive a higher salary. Rather, these monies will be saved for security purposes or emergency situations of the employees. Eventually, if you are a highly paid employee, you will have a change in gratuity as well as superannuation payouts. If you are in the medium range employee, you would receive bonus, gratuity, superannuation payouts.


Ruprekha Jena
3rd Year Law Student from KIIT School of Law, Bhubaneswar

Leave a Comment

Previous Comments

Related Blogs