Archive · 5 Dec 2025
New Labour Code 2025: Impact on Bonuses and Leave Encashment
The New Labour Code 2025 in India might change how bonuses and leave encashment work.
To follow the new rules, some parts of the bonus might be treated as regular pay.
This could mean bonuses might be smaller, but the total pay you get should stay the same.
Leave encashment, which is money you get for unused leave, won't be reduced because it's a legal right.
There's a calculator to show how different bonus percentages (like 10%, 15%, 20%, and 25%) might affect your pay.
New Labour Code 2025 may require treating excess bonus components as wages.
Bonuses might be reduced to comply with wage definitions while keeping total remuneration intact.
Leave encashment is not part of CTC and cannot be reduced as it is a statutory entitlement.
A calculator is provided for scenarios with 10%, 15%, 20%, and 25% bonuses.
The changes aim to ensure compliance with the wages definition under the new labour code.
- Who
- Employees and employers in India
- What
- Potential changes to bonuses and leave encashment under the New Labour Code 2025
- When
- Implementation of the New Labour Code 2025
- Where
- India
- Why
- To comply with the wages definition and keep total remuneration intact
- Effect on Bonuses
- Potential reduction in bonuses to comply with wage definitions
- Leave Encashment
- Not part of CTC and cannot be reduced as it is a statutory entitlement
- CTC Adjustment
- Total remuneration to be kept intact despite changes
- Bonus Scenarios
- Calculator for 10%, 15%, 20%, and 25% bonus scenarios provided
- Compliance Requirement
- Excess components to be treated as wages