April 1, 2026, marks a major shift for salaried employees as new labour and tax rules come into force, changing how quickly you get paid after leaving a job and how your salary is structured. Under the Code on Wages, 2019, companies must now complete full and final (F&F) settlements within just two working days of an employee’s last working day – a sharp departure from the earlier wait of up to 90 days. Alongside this, changes in basic salary structure, provident fund (PF) contributions and gratuity eligibility are set to impact both your monthly take-home pay and long-term savings.
2-day F&F rule kicks in from April 1
One of the most significant changes is the strict timeline for clearing dues when an employee exits a company.
Until now, employees often had to wait anywhere between 45 and 90 days to receive pending salary, leave encashment and other dues. Delays were common, especially in sectors with high attrition.
From April 1, 2026, this changes decisively. Under Section 17(2) of the Code on Wages, employers must settle all dues within two working days of the last working day.
This rule applies across situations – resignation, termination or retrenchment. If a company fails to comply, it can be treated as a legal violation, and employees can seek redressal through the labour department, including a claim for interest on delayed payments.
Gratuity rules eased, payout within 30 days
The new framework also makes gratuity more accessible and time-bound.
Earlier, employees typically needed to complete five years of continuous service to qualify for gratuity. The updated rules lower this threshold in certain cases, making employees eligible after one year of service.
Equally important is the payment timeline. Once an employee becomes eligible and exits, gratuity must be paid within 30 days, ensuring faster access to retirement-linked benefits.
Salary Structure Overhaul: Basic pay at 50% of CTC
A key structural change lies in how salaries are defined.
Under the new rules, basic salary must account for at least 50 per cent of total cost to company (CTC). This directly affects multiple components linked to basic pay. For employees, this means:
- Higher PF contributions: Since PF is calculated on basic salary, a higher base leads to increased monthly contributions.
- Better gratuity payouts: Gratuity is also linked to basic pay, resulting in higher payouts over time.
- Lower take-home salary: With higher deductions towards PF, monthly in-hand salary may reduce slightly.
On average, take-home salary could drop by around 2 per cent to 5 per cent, depending on the existing salary structure, even as long-term savings improve.
Companies face 5–15% cost increase
The changes are not limited to employees. Employers are also likely to see higher compliance costs.
Industries such as IT, BPO and retail – where basic salaries were often kept low to optimise costs – may face a 5 per cent to 15 per cent increase in statutory expenses due to higher PF and gratuity liabilities.
This could influence future salary hikes, hiring strategies and compensation structures as companies adjust to the new norms.
What employees should check before resigning?
With the new rules now in force, employees planning to switch jobs should keep a few things in mind.
Notice period compliance
Ensure your notice period is served properly. Any shortfall could be adjusted against your final settlement, even within the two-day payout window.
Investment proofs and tax details
Submit all relevant documents in advance so that tax deductions are calculated correctly and there are no surprises in your final payout.
Payroll updates with employer
Confirm with your HR team whether your company has updated its payroll systems in line with the new labour codes effective April 1.
