New Labour Laws: IT companies brace for a higher wage bill

IT and IT-enabled services firms are set to face a notable rise in their wage bills as India's new Labour Codes come into effect.

The IT and ITES industry, one of the country's most formalised sectors and a major employer, will see statutory costs rise across salary structures, health requirements, and compliance processes.

The biggest cost driver is the revised definition of wages. Under the new rules, companies must ensure that an employee's basic salary is at least 50% of total compensation.

Earlier, most firms kept basic pay relatively low and allocated a higher share to allowances, which helped reduce contributions towards provident fund, gratuity, and leave benefits.

With the new definition mandating a 50% basic salary, these statutory payouts automatically increase.

The new law also makes annual health checks mandatory for employees above the age of 40. This alone may add around ₹1,000-₹2,500 per employee each year, increasing the health-related cost burden on companies.

Additionally, compliance-related manpower and process requirements are expected to rise.

According to the Business Standard, these changes could result in a 5-10% increase in overall payroll costs for IT and ITES companies.