India's Labour Law Overhaul: What It Means for Your Wallet
The Indian government has ushered in a transformative era for workers by replacing 29 outdated labour laws with four comprehensive Labour Codes. This massive regulatory shift aims to improve life for employees while simplifying compliance for employers, bringing India closer to international labour standards.
These sweeping changes guarantee fundamental rights including minimum wages, equal pay for men and women, and enhanced workplace safety measures. Workers above 40 years will benefit from mandatory preventive health check-ups, marking a significant step toward prioritizing employee wellbeing.
Redefining Your Salary Structure
One of the most crucial changes involves how your wages are defined for calculating statutory benefits. Previously, companies could maintain low basic pay while increasing allowances to reduce gratuity and other payments calculated on basic salary.
Under the new rules, at least 50% of your total Cost to Company (CTC) must be treated as wages for benefit calculations. As Shipra Singh reports, this will increase gratuity payments and leave encashment allowances, though it might reduce maternity benefits for some employees.
Fixed-term employees receive particularly good news: they'll now qualify for gratuity after just one year of service instead of the previous five-year requirement.
PF Contributions and Variable Pay Trends
For employees earning above ₹15,000 monthly, Provident Fund contributions remain largely unchanged. Employers can continue calculating PF contributions on the ₹15,000 threshold rather than the full salary, though this limit is expected to increase soon.
While workers gain significant benefits, employers face increased costs, leading to a notable shift toward variable performance-linked pay. Companies are expanding variable pay components beyond senior leadership to mid-management and junior roles.
This trend presents new financial planning challenges as households must adapt to income lumps during bonus seasons rather than consistent monthly earnings. Financial experts recommend covering essential expenses with fixed salary while using bonuses for investments and large purchases.
Investment Landscape Updates
In investment news, Parag Parikh Mutual Fund is generating buzz with its planned entry into the large-cap fund space in January. Despite already managing India's largest flexi-cap fund, the company will launch a strategy closely tracking the Nifty 100 index while aiming to keep costs comparable to index funds.
Maulik M suggests investors might prefer sticking with simple index funds until this new offering establishes a track record.
For bond investors, Online Bond Platforms (OBPs) have revolutionized corporate bond accessibility since their 2022 launch. With 44 platforms now operating and monthly transactions nearly tripling year-over-year, retail investors can buy and sell corporate bonds with ticket sizes as low as ₹10,000. Jash Kriplani emphasizes the importance of matching bond investments with personal risk-return-timeframe goals.
Special Considerations for NRIs and Founders
Non-Resident Indians planning property purchases in India face unique challenges, as detailed by Anagh Pal. Even chartered accountants struggle with tax rules and paperwork when buying property from abroad, highlighting the need for local support throughout purchasing, renting, and selling processes.
The article also explores how startup founders who've built companies to IPO manage their wealth. According to Ashish Shanker of Motilal Oswal Private Wealth, these new-age millionaires often maintain high-risk appetites in their investment strategies compared to traditional wealthy families.
In weekly Mint Money insights, Madhu Damodaran of EPFO's Central Board of Trustees discusses proposed changes making EPF access easier while potentially increasing wait times for complete withdrawals.
Deepti Bhaskaran, Mint Money editor with nearly twenty years of personal finance journalism experience, continues driving financial literacy and practical money management awareness through these comprehensive updates.
