Salaried class may face difficulties to repay EMI from April 2021; know impact of new salary structure in your life

The government has 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.

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.

This also means that there will be a consequent rise in gratuity and PF contribution of the employee. Hence, while the take home pay of the employees may be reduced, the Gratuity and PF component may rise.

On one hand, while the new pay rules may be beneficial for people in terms of post retirement benefits, on the other hand the reduction in the take home salary may affect their current financial situation. Less in hand salary means thta you have to restructure your household expenses, loans, SIP, etc.

Usually salaried class people spend 40 percent of their salary in EMIs --including home loan, car loan EMI etc. A reduction in take home salary may make it difficult to manage the expenses.

Once the new proposed Wage Rule is being implemented, it will have a major impact in your life. Hence it is better to understand how it will affect your everyday life so that you can start preparing from now onwards.