Question
The new wage definition under the Code on Wages — how it affects PF and gratuity
Answer
Bottom line: The Code on Wages, in force from 21 November 2025, requires basic wages to be at least 50% of pay — which raises PF and gratuity.
1. The 50% rule
If allowances like HRA exceed 50% of total remuneration, the excess is treated as "wages", so basic effectively cannot fall below half of your pay.
2. The effect
A higher basic increases the 12% PF contribution and the gratuity base, so take-home may dip a little while retirement savings rise.
3. In transition
The Code is in force, but some thresholds and state rules are still being notified.
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This answer is general information based on the law as it stood when written and is not professional advice on your specific situation. Verify the current position and consult a qualified professional before acting. See our disclaimer.