The government has clarified that there will be no reduction in salary due to the recently implemented Labor Code, as PF deduction will be as per the salary limit of Rs 15,000 and making additional contribution will be voluntary. The Ministry of Labor and Employment said in a post on social media platform
PF deduction will be limited to the salary limit of Rs 15,000 and contribution beyond this limit is voluntary, not mandatory. Since the announcement of the Labor Code last month, a lot of questions have been raised regarding the reduction in net salary, as according to the new definition of ‘salary’, the basic salary and related variables should be at least 50 percent of the total salary. According to many reports, this has increased the fears of increase in PF contribution and reduction in salary.
Earlier media reports had said that the change in definition was expected to affect the calculation of many social security contributions including PF, ESIC, workers compensation and maternity benefit, take home salary may also be affected.
The new Labor Codes do not reduce take-home pay if PF deduction is on statutory wage ceiling. PF deductions remain based on the wage ceiling of ₹15,000 and contributions beyond this limit are voluntary, not mandatory.#ShramevJayate pic.twitter.com/zHVVziszpy
— Ministry of Labor & Employment, GoI (@LabourMinistry) December 10, 2025
However, the salary limit of EPF is Rs 15,000, which means that contribution is mandatory only up to this amount. According to the ministry, if the deduction is made based on this limit, there will be no change in the take-home pay. Employees and employers can voluntarily contribute more than this limit, but it is not mandatory.
understand with example
The ministry has further clarified with an example. An employee is earning Rs 60,000 per month, of which basic salary and dearness allowance are Rs 20,000 and allowances are Rs 40,000. Considering the EPF contribution of Rs 1,800 with 12 per cent contribution under the limit of Rs 15,000, there will be no change in the take-home salary under both the new and old labor laws. PF contribution will be applicable only up to the statutory salary limit of Rs 15,000, regardless of actual basic pay.
Take-home salary before labor law
Employer PF (12 percent) = Rs 1,800
Employee PF (12 percent) = Rs 1,800
Total salary = Rs 56,400
Total salary after implementation of new labor code
Employer PF (12 percent) = Rs 1,800
Employee PF (12 percent) = Rs 1,800
Total salary = Rs 56,400 (no change)
According to the new labor code, allowances should be limited to 50 percent of the total salary. If the allowances exceed this limit, the excess amount must be included in the salary for statutory calculations. However, barring voluntary increase, the PF limit will remain at Rs 15,000.
Announcement of new labor code
On November 21, the government issued four new labor codes combining 29 laws, which aim to promote ease of doing business while protecting workers’ rights. These include Salary Code, Industrial Relations Code, Social Security Code and Occupational Security Code. Several important provisions have been added under the new labor codes, which are likely to affect more than 4 crore workers in both the formal and informal sectors.