New labour codes hit India’s IT giants with Rs 4,373 crore in Q3

MUMBAI: India’s biggest IT services firms have taken a collective hit of more than Rs 4,373 crore after new labour codes came into force in November 2025, triggering sharp exceptional charges and denting quarterly profits, media reports said.

Tata Consultancy Services, Infosys and HCLTech booked the costs in the December quarter to align with the statutory overhaul, which tightens rules on wages, social security and employee welfare. The charges stem largely from higher gratuity and leave liabilities linked to past service.

Infosys reported an exceptional charge of Rs 1,289 crore, dragging its operating margin down to 18.4 per cent from 21 per cent in the previous quarter. The company said margins would have stood at about 21.2 per cent without the labour code impact.

TCS absorbed the largest hit, booking Rs 2,128 crore, but held its operating margin steady at 25.2 per cent. HCLTech reported a charge of Rs 956 crore and improved its margin to 18.6 per cent.

Executives at all three firms played down the longer-term effect. TCS CFO Samir Seksaria, said the ongoing impact would be limited to around 10–15 basis points.
Infosys CFO Jayesh Sanghrajka flagged a similar annual drag of about 15 basis points. HCLTech chief executive C Vijayakumar put the recurring impact at 10–20 basis points.

The four new labour codes mandate higher basic pay, defined working hours, appointment letters and expanded social security, including provident fund and
gratuity calculated on wages that must be at least 50 per cent of cost to company.

Brokerages are less sanguine. Global brokerage firm Jefferies on Monday warned the changes would add to margin pressure already building from slower growth, AI-driven shifts in business mix and potentially higher onsite wage costs. A two per cent rise in employee expenses could cut FY27 earnings by 2–4 per cent, it said, forcing firms to temper future wage hikes.