Raising the “Wages” component to the mandatory 50% of CTC significantly increases the contribution base for both EPF and ESIC. Even with the ₹15,000 PF wage ceiling, monthly EPF/EPS contributions rise—and for employees without the ceiling (or under voluntary higher PF), the increase is substantial. Similarly, ESIC contributions escalate for all employees earning below the ₹21,000 eligibility limit, as their revised “Wages” now form a larger share of their pay. Together, these changes create a higher recurring statutory cost for employers, directly impacting payroll budgets and cost planning.

With the New Wage Code raising the “Wages” base to at least 50% of CTC, gratuity payouts will rise sharply because gratuity is calculated on the last drawn wages. This directly increases the lump-sum liability for every long-serving employee. Additionally, the new law grants Fixed-Term Employees (FTEs) full gratuity eligibility after just one year of continuous service—down from the earlier five-year requirement. Since the automotive and ancillary industries rely heavily on FTEs to manage production cycles, this creates a substantial new financial obligation and long-term provisioning requirement for employers.

The New Labour Codes strengthen Principal Employer accountability, making auto manufacturers ultimately responsible for ensuring that contractor-deployed workers receive all statutory benefits—EPF, ESIC, minimum wages, and even gratuity. This means that any failure by the contractor becomes a direct liability for the auto company. To avoid penalties and backdated demands, manufacturers must adopt strict digital oversight, embed stronger liability clauses in contractor agreements, and verify—on a monthly basis—that contractors have correctly remitted EPF and ESIC for every worker on-site. This marks a significant compliance escalation for the auto and ancillary sector.