One commonly misconstrued part first, there is NO specific rule that it is exactly 50% of CTC. The Code on Wages defines wages inclusively, and if these excluded parts (HRA, Conveyance, Bonus,Employer PF, Gratuity, Overtime, etc.) form more than 50% of overall pay, it will be brought back under wages; that takes us to almost a similar state of 50% of the CTC floor!
How to structure: Go through your CTC template, piece by piece, mark each component as wages orexcluded. See if your excluded is over 50%. If yes, then increase the Basic + DA or move some allowances (which is typically using the Special allowance as the lever) into basic.
Involve Finance before releasing, as this directly impact the PF (employer and employee), gratuity provisions, potentially bonus – the CTC could even look same while your hand to hand movement reduces! Communicate with the employee prior, not after their first statement! Monitor this on a state by state basis, because these changes aren’t coming on a one particular date!
Let us call CTC Total Remuneration henceforth with all cash and non-cash/in kind payments considered. In kind remuneration upto 15% of total remuneration is Inclusion. Breakup your total remuneration into exclusions and inclusions with exclusions (not considering gratuity, ESI and retiral benefits) not to exceed 50% of total remuneraiton.
Our finding having done compensation structure review and revision of 20 organizations is that exclusions need to be bumped up while redesigning your comp structure. Higher inclusions (Wage) mean higher SS benefit contribution and lower take home. This exercise is delicate and needs to be strategic. Also, the optimal revised structure would tend to be balanced on inclusions and exclusions, not disturb SS benefits contribution, not entail reduction in take home and not result in incremental costs for the organization. That requires making several options and iterations of the current comp structure.
Organisations need to bring Gratuity and EL into the compliance fold which is a compliance lapse in small and mid-sized NGOs. Please do that now. Look at negotiating with the donors for funding incremental costs now that the iron is hot.
The state rules as Animesh said lay out the procedures and Forms for registration for LIN, Annual Return, Gratuity registration after getting gratuity insured and no longer carried as provision in books. Start complying with a plan, not all at the same time but you have limited time. Keep the codes (3 only excluding IR Code for normal NGOs) and state rules even if they are in draft stage side by side for full comprehension.
The state acts on labour continue and need to co-exist with Labour Codes specifically in case of Earned Leave.