New Labour Codes Chop ₹12,000 Cr from India Inc. Profits

In the December quarter, India's top companies experienced a substantial financial blow due to newly implemented labour codes. Twenty-five of the top 30 firms reported a combined profit reduction of approximately ₹12,000 crore. This impact stems from revised mandates for social security and retirement benefit contributions.

These new codes require wages to constitute at least 50% of remuneration, increasing statutory payouts like gratuity and provident fund. Tata Consultancy Services alone noted a ₹2,128-crore impact, primarily due to gratuity and leave liability adjustments for past employee salaries.

While many companies have recognized one-time costs related to past service liabilities, the recurring impact on wage bills is expected to be minimal, around 10-15 basis points for some. However, sectors with a higher proportion of basic salary in total remuneration, such as IT, face a more pronounced effect.

Despite the short-term financial pressure, experts anticipate these labour codes will ultimately enhance social security for workers in both organized and unorganized sectors. Companies are planning modest salary increments for the upcoming fiscal year, factoring in these new costs and global economic uncertainties.