The new Labor Codes notified by the Government of India in November 2025 have resulted in increased employee expenses for private sector banks and insurance companies, pushing up their overall operating costs in the October–December quarter (Q3FY26).
Key Highlights
- Implementation of new labour codes increased employee-related expenses for private banks and insurance companies.
- Higher statutory provisions under revised wage structures impacted operating costs during the December quarter.
Private lenders and insurers have had to recognise additional statutory expenditure in their profit and loss accounts as they adjust to the revised norms under the consolidated labour framework. For instance, HDFC Bank reported a jump in operating expenses to ₹18,770 crore in Q3FY26 from ₹17,110 crore in the previous quarter, attributing an estimated ₹800 crore increment specifically to higher employee costs due to the new labour codes.
Similarly, private insurance firms have seen additional provisions impact their financials. HDFC Life Insurance booked an incremental ₹106.02 crore, ICICI Prudential Life Insurance recognised ₹11.04 crore, and ICICI Lombard General Insurance accounted for ₹53.06 crore in employee benefit expenses linked to the fresh regulatory requirements.
In contrast, public sector banks have largely avoided such cost increases, as their existing salary structures were already closer to the requirements under the new labour codes and thus required minimal adjustments.
Also Read: New Labour Codes Hit TCS, Infosys, HCLTech Profits in Q3
Industry analysts note that the updated codes mandate changes in salary composition — specifically an increased emphasis on basic pay and key allowances — which in turn raises employer contributions to statutory benefits such as gratuity and pension funds under the revised labor norms.
