Labour codes 2025: How 50% wage rule would alter salaries, tax outgo, retirement savings

At the core of the reform is a uniform definition of “wages”, limited to basic pay, dearness allowance and retaining allowance, which must together form at least 50% of an employee’s CTC—reshaping salary structures, taxation and retirement savings. All other components, including HRA, bonuses, commissions and incentives, are capped, with any excess automatically reclassified as wages, curbing salary splitting and standardising wage calculations.