Why India’s New Labour Codes Led to a Rs. 1,289 Crore Exceptional Charge for Infosys

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Infosys has reported a significant one-time financial impact of Rs. 1,289 crore thanks to the implementation of India’s new labour codes, effective since 21 November 2025. This statutory charge, classified as an exceptional item in its Q3 FY26 results, primarily stems from increased liabilities for gratuity and leave encashment.

Despite this hit, the company raised its annual revenue growth guidance to 3%–3.5%, signaling resilience amid a broader industry-wide struggle to balance rising employee costs with digital transformation growth.

How New Wage Definitions Lowered Tech Profits

The high cost for Infosys follows the Code on Wages and the Code on Social Security. These laws change how wages are calculated. Now, basic pay must make up at least 50% of an employee’s total pay package. In the past, tech firms kept basic pay very low. They used various allowances to fill the rest of the salary.

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As the basic pay is now higher, companies must pay more into retirement funds. Infosys had to recalculate these benefits for over 330,000 employees. Other firms are facing the same issue. TCS took a Rs. 2,128 crore hit, and HCLTech lost Rs. 956 crore. The entire IT industry is now paying a high price to match these new worker-friendly standards.

Will Your Take-Home Pay Shrink Due to the Infosys New Labour Codes Impact?

It is important to note how these changes affect a worker's monthly paycheck. While the company loses money on paper, employees will see a change in their bank accounts. Since PF and gratuity are based on "wages," higher wages mean higher monthly deductions.

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A mid-level developer might see 4% to 6% less cash in their pocket each month. However, there is a hidden benefit. While you get less money now, your retirement savings (PF) will grow much faster. Also, the new laws let workers trade in unused vacation days for cash every year. This gives employees a new way to get extra money that they did not have before.

The Rs. 1,289 crore cost is a one-time event, but higher daily costs are here to stay. IT companies must now find new ways to save money. We may see more hiring in smaller cities where it is cheaper to live and work. This could help companies balance the higher cost of these new laws.