With the Budget 2021 just around the corner, expectations are that there would be some kind of announcement by the government regarding the 7the Pay Commission. The greatest expectations would be for a salary hike and then for restoration of dearness allowance.
However, employees might also want to know about the take-home pay of employees next financial year ie, April 2021 while components like PF and Gratuity might rise.
1. Take-home pay of employees may be reduced for next financial year
The government notified draft rules under Code on Wages 2019, following which take-home pay of employees may be reduced from next financial year ie, April 2021 because the draft rule required companies to restructure their salary break up
2. What does the draft rules say?
The draft rules mention that employees’ allowance component cannot exceed 50 percent of the total pay package, resulting which, companies or employers will have to allocate 50 percent of the salary to basic salary component.
3. PF and Gratuity component will incease
while the take home pay of the employees may be reduced, the Gratuity and PF component may rise.
4. Union Government notified the draft rules on November 13
Union Ministry of Labour and Employment had on November 13 notified the draft rules under the Code on Social Security, 2020 inviting suggestions from the stakeholders within a period of 45 days from the date of notification of the draft rules.
5. What are the provisions under the draft rules?
The draft rules provide for operationalization of provisions in the Code on Social Security, 2020 relating to Employees’ Provident Fund, Employees’ State Insurance Corporation, Gratuity, Maternity Benefit, Social Security and Cess in respect of Building and Other Construction Workers, Social Security for Unorganised Workers, Gig Workers and Platform Workers.
6. DA jump
If the Centre decides to restore 4 percent DA for July to December 2020 and add another 4 percent DA for January-June 2021, then the net DA of the central government employees would jump to 25 percent.