The New Labour Code 2025, rolled out last month, has introduced a clearer and more uniform definition of wages. Under the new rules, an employee’s basic pay, dearness allowance and retaining allowance must together account for at least 50% of the total cost-to-company (CTC). As the government has explained, wages will now be calculated by adding back these components to ensure a consistent base for gratuity, pension and other social security benefits. Advertisement

While the change may appear technical, it has real implications. It will alter how statutory contributions are calculated, affect the tax deductions employees can claim, and ultimately influence both monthly take-home pay and long-term savings for workers across income levels.

Revised wage structure

According to CA Dr Suresh

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