How Can We Restructure Salaries to Meet the New Wage Code Requirements?

Altering Monthly Gross Salary While Maintaining CTC

I seek an opinion on the alteration of Monthly Gross Salary while maintaining the same total payout (CTC) for the year to comply with one of the major requirements as per the New Wage Code, which entails maintaining Basic Pay at 50% of the total wages.

For example, if the present Monthly CTC Salary of an employee is Rs. 50,000, i.e., Rs. 6 Lacs per annum, can we opt for a payment of Rs. 35,000 monthly and Rs. 15,000 through allowances payable quarterly while still maintaining the same total CTC of Rs. 6 Lacs for the year? This would entail Rs. 35,000 x 12 = Rs. 4,20,000 through monthly payouts and Rs. 15,000 x 3 months = Rs. 45,000 x 4 Quarters = Rs. 1,80,000 through allowances.

During the restructuring of the salary, the monthly statutory benefits like PF and Gratuity shall be maintained.

Regards,
Rakesh Shinde

Dear Rakesh,

Your question about restructuring salaries to comply with the new wage code is pertinent. You can indeed restructure the salary while maintaining the same CTC. Here's how you can go about it:

1. Monthly Salary: You can adjust the Monthly Gross Salary to Rs. 35,000. This will amount to Rs. 4,20,000 annually.

2. Allowances: You can allot Rs. 15,000 as allowances, payable quarterly. This will total Rs. 1,80,000 annually.

This structure ensures the total CTC remains Rs. 6,00,000 annually.

However, there are a few important points to consider:

👍 The New Wage Code mandates that the Basic Pay should be 50% of the total wages. So, you need to ensure that the Basic Pay is at least Rs. 25,000 (50% of 50,000).

👍 When you are restructuring, please ensure that the monthly statutory benefits like PF & Gratuity are calculated on the revised Basic Pay.

👍 The allowances should comply with the tax laws. Some allowances are fully taxable, while others may be partially or fully exempt. Therefore, you should also consider the tax implications while structuring the allowances.

👍 Always communicate any changes in the salary structure to your employees clearly and in a transparent manner.

👍 Last but not least, the restructuring should be in line with the employment agreement and company policies.

I hope this helps you in restructuring your salaries in compliance with the New Wage Code. Remember, the key is to abide by the laws, maintain transparency with your employees, and consider the tax implications. Good luck! 🎈