New Labour Regulations May Reshape Employee Compensation
India's upcoming labour code reforms could lead to a noticeable reduction in take-home salaries for employees across sectors, according to fresh analysis from SBI Research. The financial institution highlighted this potential shift in a research note published on Tuesday, November 25, 2025.
Basic Salary Requirement at Core of Changes
The central issue identified by analysts revolves around the new mandate that basic salary must constitute at least 50% of the total Cost to Company (CTC). This structural change, while increasing retirement benefits, may directly impact the monthly income that employees receive in their bank accounts.
SBI Research explained that as organizations restructure salaries to comply with the new requirement, the proportional allocation toward provident fund contributions will increase. Since PF deductions are calculated as a percentage of basic salary, the higher basic pay component will automatically lead to larger monthly contributions toward retirement funds.
Trade-off Between Current and Future Benefits
The analysis presents a clear trade-off for Indian employees: while immediate take-home pay might decrease, long-term retirement security will see significant improvement. The increased basic salary translates to higher contributions toward both Employee Provident Fund (EPF) and Employee Pension Scheme (EPS), potentially resulting in substantially larger retirement corpus for workers.
This rebalancing of compensation structure represents one of the most substantial changes introduced by the new labour codes, which aim to streamline and modernize India's complex labour regulations. The reforms consolidate multiple existing labour laws into four comprehensive codes covering wages, industrial relations, social security, and occupational safety.
Industry experts suggest that the implementation timeline and specific guidelines from state governments will determine how quickly these changes take effect across different organizations. Companies are expected to undergo significant payroll restructuring to align with the new requirements once the codes become fully operational.
Employees across India should prepare for potential adjustments in their monthly compensation structure as organizations begin implementing these mandatory changes to their payroll systems in compliance with the new labour regulations.
