50% wage rule CTC calculator: what gets reclassified as wages, and what it does to PF, gratuity and take-home
Enter one employee's monthly salary split. The calculator applies the 50% test from the Code on Wages, shows what gets added back to wages, and works out the change in PF, gratuity accrual and take-home.
Indicative only. The figures above are worked out from what you entered, in your browser, and are not stored anywhere. They are not advice and not a filing. The consultation is where your real payroll and records get verified. NidhiSetu is independent and not affiliated with EPFO or ESIC; their own services are free.
How this is calculated
- Wages start as basic + DA + retaining allowance. Excluded components are HRA, special allowance and other allowances.
- The 50% test: if excluded components exceed half of total remuneration (wages + excluded), the excess is added back to wages. So wages are never below half of the total.
- PF base = wages, capped at ₹25,000 when the box is ticked. Employer PF = 12% of the base; employee PF = 12% of the base.
- Gratuity accrual per month = wages × 15 ÷ 26 ÷ 12. Gratuity is payable only on completing the qualifying service; this is the monthly provision.
- Take-home change = the change in the employee's 12% deduction only. Tax, ESIC and professional tax are not modelled.
- The computation wording in the Code on Wages and the central rules is as I last read it; see the 50% wage rule post for the source and the open points.
Questions about this tool
What is the 50% rule?
Under the Code on Wages, if the allowances excluded from "wages" add up to more than half of total remuneration, the amount above half is treated as wages. The effect is that wages can never be less than 50% of total remuneration.
Does the PF ceiling still apply?
Yes. PF contributions are on PF wages up to ₹25,000 unless the employer contributes on higher wages. The tool applies the ceiling by default; untick the box to see the uncapped figure.
How is gratuity accrual calculated here?
15 days' wages for each completed year, spread monthly: wages × 15 ÷ 26 ÷ 12. It is an accrual estimate, not the payable amount, which depends on completed service.
Is the take-home change exact?
No. It shows the change in the employee's 12% PF deduction only. Income tax, ESIC and professional tax are not modelled.
Read the rule behind this tool
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NidhiSetu is independent and not affiliated with EPFO. EPFO's own services are free.