The implementation of India’s new labour codes has resulted in a significant financial impact on the country’s leading IT services companies, with Tata Consultancy Services (TCS), Infosys, and HCLTech together incurring costs exceeding ₹4,000 crore in the third quarter. These expenses were largely one-time provisions arising from changes in employee benefit calculations mandated under the revised labour regulations, which came into effect during the quarter.
Key Highlights
- New labour codes led to over ₹4,000 crore in one-time costs for top Indian IT companies.
- TCS, Infosys, and HCLTech expect limited long-term margin impact despite the Q3 profit hit.
The new labour codes require companies to reassess long-term employee liabilities, including gratuity, leave encashment, and other post-employment benefits. As a result, TCS reported the highest exceptional charge, accounting for more than half of the total industry impact, followed by Infosys and HCLTech, each booking substantial provisions in their quarterly accounts. These adjustments had a direct effect on reported profits and margins for the quarter, temporarily weighing on financial performance.
Industry executives, however, have emphasized that the bulk of these costs are non-recurring in nature and reflect accounting realignments rather than ongoing cash outflows. Management teams across these firms have indicated that while there may be a marginal impact on operating margins going forward, it is expected to be limited to low double-digit basis points and should not materially alter long-term growth outlooks.
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The labour reforms are aimed at simplifying and consolidating multiple employment laws while improving social security coverage for workers. Although the short-term financial burden is notable, analysts believe that greater regulatory clarity could eventually benefit employers by reducing compliance complexity. For India’s IT sector, which employs millions, the transition underscores the scale at which regulatory changes can influence corporate balance sheets, even for the country’s largest and most financially resilient companies.
