New Wage Code 2022: There is a lot of discussion about Cost to Company (CTC) in the New Wage Code. If sources are to be believed, the New Wage Code will be implemented soon. Its preparation has been completed in the Labor Ministry. Most of the states have got approval on the drafts. With the implementation of this code, the biggest impact will be on those doing private jobs.
This will completely change the take home salary, PF and gratuity. In this code, the salary coming in the hands of the private employer can be reduced. However, the government is making better arrangements regarding old age. According to experts, the monthly in-hand salary will undoubtedly decrease, but due to the increase in basic, more money will be deposited in the retirement fund. This will create a huge fund for retirement. Apart from this, there will also be benefit in Gratuity.
Understand the calculation here
If the age of an employee is 30 years and his monthly salary is 50 thousand rupees and basic salary will be 15 thousand rupees. So if the average appraisal is taken in 5% salary every year till the age of retirement i.e. 60, then according to the current interest rate of 8.1%, the total amount in the PF account from regular investment will be Rs 65,36,758.
Now the basic salary of an employee will be 25 thousand rupees per month. Then the amount of PF on retirement will be Rs 1,08,94,586. Here the annual increment of 5 percent has been taken, due to which the PF fund will increase further.
What is Cost to Company
New Wage code benefits: CTC is the expenditure incurred by a company on its employee. This is the complete salary package of the employee. CTC includes Monthly Basic Pay, Allowances, Reimbursement. At the same time, products like gratuity, annual variable pay, annual bonus are included on an annual basis. The amount of CTC is never equal to the employee’s take home salary. CTC has many components so it is different. CTC = Gross Salary + PF + Gratuity
What is the basic salary?
Basic salary is the base income of an employee. It is fixed based on the level of all the employees. It varies according to the rank of the employee and the industry in which he is working.
What is Gross Salary?
The salary which is made by adding basic pay and allowances without deducting tax is called gross salary. This includes bonus, overtime pay, holiday pay and other itemized allowances.
Gross Salary = Basic Salary + HRA + Other Allowances
What is net salary?
Net salary is also called take home salary. The salary that is made after deducting tax is called net income.
Net Salary = Basic Salary + HRA + Allowances – Income Tax – EPF – Professional Tax
What allowances will be included?
The company gives allowances to the employee in lieu of the job. This may vary from company to company.
> HRA : House Rent Allowance is given to the employee in lieu of the house on rent.
> LTA : LTA is the cost of domestic travel to the employee. This does not include food, hotel fare.
> Conveyance Allowance: Conveyance allowance is given to the employee in lieu of the expenses incurred in going home from office.
> Dearness Allowance: DA is a living allowance. It is given in lieu of inflation. Its eligible are government employees and pensioners.
> Other allowances include special allowance, medical allowance and incentive or incentive.
How much will be the reimbursement
According to experts, in many companies, there is a provision to reimburse the employee for treatment, phone expenses, newspaper bills. This amount is available separately from the salary. But only after paying the bill. Under the Income Tax Act, every reimbursement is tax exempt up to a limit.