New Wage Code: In the new wage code, it has been said that the basic salary of the employee will not be less than 50 percent of his CTC. This will also affect the amount of EPF (Employees Provident Fund) of the employee.
New Wage Code / Provident Fund: The discussion of the new pay scale rules (The New Wage Code) is fast these days. In media reports, a lot has been written and said about this, but no formal announcement has been made by the central government about it so far. However, the biggest thing is that whenever the new Wage Code will be implemented, it will be a matter of great concern for those working in the private sector (New Wage Code Update).
Relief from new wage code
In the new wage code, it has been said that the basic salary of the employee will not be less than 50 percent of his CTC. This will also affect the amount of EPF (Employees Provident Fund) of the employee. The employee and the company will contribute 12-12 percent of the basic salary every month in the PF.
What does EPFO rule say?
According to EPFO rules, if you withdraw the entire amount of PF, then it is not taxed. Therefore, after the implementation of the new wage code, when the basic salary is above 50% and the PF contribution is deducted on it, then the PF fund will also be more. That is, when the employee retires, he will have more PF balance than before. Let us understand its calculation with an example.
Suppose you are 35 years old, and your salary is Rs 60,000 per month. In this case, if your annual increment of 10% is assumed, then the interest rate of the current PF at 8.5% till the age of retirement i.e. after 25 years, your total PF balance will be Rs 1,16,23,849.
Retire as a millionaire
At the same time, when comparing its PF balance with the existing EPF contribution, then the amount of PF balance after retirement is Rs 69,74,309. That is, with the new wage rule, the PF balance will be at least 66% more than the old fund. That is, if the new wage code is implemented, then you will retire as a millionaire.
Gratuity will also change
According to the new wage code, there will be a change in the gratuity of the employees. The calculation of gratuity will now be done on a larger basis, which includes basic pay as well as other allowances like travel, special allowance etc. All this will be added to the company’s gratuity account.