With the implementation of the Four Labour Codes from 21 November 2025, the way employees’ salaries are structured and reflected in financial statements — such as monthly payslips or CTC breakup — has undergone a significant shift. Under the rules of the Code on Wages and associated labour reforms, employers are now required to ensure that an employee’s “basic salary + dearness allowance” accounts for at least 50% of total CTC/wages, a departure from the earlier common practice where basic pay often constituted only 25–40 %. (The Times of India)
This recalibration means that many components earlier classified as “flexible allowances” (like special allowance, house-rent allowance, etc.) must now be reduced to accommodate the higher basic component, even if the overall CTC remains unchanged. (The Economic Times) As a result, while gross compensation (CTC) stays the same, an employee’s take-home salary may shrink because contributions tied to basic pay — such as provident fund (PF) and gratuity — increase. (The Times of India)
On the positive side, this structural change improves long-term benefits: PF contributions rise and gratuity calculations (which are based on basic salary) now yield higher returns, potentially boosting retirement corpus and long-term financial security for employees. (The Financial Express) However, many employees may need to re-evaluate their monthly budgets and financial planning — since lower take-home pay and reduced allowances could affect monthly expenses, taxes, HRA claims and EMI capacity, while the formal financial statements or salary slips will reflect a different breakdown than earlier.
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