New Labour Codes: What Changes in Your Salary Slip (2026)

1. One definition of "wages"

Wages now means basic pay, dearness allowance and retaining allowance. Allowances such as HRA, conveyance and overtime are excluded, but only up to half of your total pay. If the excluded items are more than 50% of total remuneration, the extra part is added back to wages. Performance incentives, variable pay, ESOPs and reimbursements are outside this test.

Example: total monthly pay ₹60,000, of which basic + DA is ₹24,000 and HRA plus other allowances are ₹36,000. Half of total pay is ₹30,000. The allowances are ₹6,000 above that, so ₹6,000 is added back and wages for PF, gratuity and ESI purposes become ₹30,000. The Labour Ministry's FAQ on the codes works through a similar example. How much is added back for you depends on how your CTC is split.

This one definition is used for PF, gratuity, ESI and bonus, which is why it touches almost every line of a salary slip.

2. PF: the wage ceiling is now ₹25,000

From 17 September 2026, the EPF wage ceiling was raised from ₹15,000 to ₹25,000 a month (notification S.O. 5109(E)). Employees with PF wages up to ₹25,000 must now be covered, and those between ₹15,000 and ₹25,000 who were only in EPF are also enrolled in the pension scheme (EPS).

For someone with PF wages of ₹22,000 whose employer used to deduct PF only on ₹15,000 (₹1,800), the employee share goes up by ₹840 a month. Take-home falls by that amount, but the same amount goes into your PF account, together with a higher employer contribution. Contributions above the ceiling stay optional.

3. Gratuity: bigger base, and one year for fixed-term staff

Gratuity is still 15 days' wages for each completed year, using the 15/26 formula, with a ₹20 lakh limit. Because wages now include the add-back, many people get more gratuity on the same salary. Fixed-term employees qualify after one year instead of five. Our gratuity calculator page has a full worked example.

4. Final settlement within two working days

Under section 17(2) of the Code on Wages, wages due must be paid within two working days of resignation, removal, dismissal, retrenchment or closure. This covers wages only. Gratuity still has its own 30-day deadline, and PF is settled through EPFO. Whether leave encashment falls under the two-day rule, and whether the clock starts on the resignation date or the last working day, is still being debated. See our guide on full and final settlement.

5. Leave

For workers covered by the OSH Code, annual leave is earned at one day for every 20 days worked, once you have worked 180 days in a calendar year. Up to 30 days can be carried forward, and you can ask for encashment of leave at the end of the year. Managers and supervisors above the wage limit may still be governed by company policy and state law. More in our leave encashment guide.

6. ESI

The ESI wage ceiling stays at ₹21,000 (₹25,000 for persons with disability), and the new wages definition also applies to ESI. Check your deduction with the ESI calculator.

Where things stand

The central government notified the final rules under all four codes on 8 May 2026. States are notifying their own rules. By late September 2026 about 10 states had final rules and the rest had drafts out. Because state rules can differ, ask HR which rules your employer follows.

Sources and where to verify

• Ministry of Labour & Employment
• EPFO
• ESIC

This guide is for general information and planning only, based on rules as reported up to 9 November 2026. Rules change, so confirm with the official source, your employer or institution, or a qualified adviser before you act on it.

Frequently asked questions