Labour Codes May Raise Company Wage Bills by Up to 10%, Industry Estimates
The implementation of India’s new Labour Codes is expected to increase employers’ wage bills by around 1.5% to 10%, according to industry estimates. Employer associations have been engaging with the Labour Ministry, highlighting concerns over higher costs arising from revised provisions on wages, gratuity, and bonus calculations. The ministry has recently released draft rules for the four Labour Codes to bring clarity on these aspects.
Industry sources note that while companies may face short-term pressure on expenses, the new Labour Codes also introduce several long-term benefits. These include greater flexibility in hiring and retrenchment processes, reduced compliance burdens, and a more streamlined regulatory framework, which are expected to support investment and business growth over time. There is also an acknowledgment within industry that many of the employee-friendly provisions are necessary reforms.
Meanwhile, the Institute of Chartered Accountants of India (ICAI) has clarified that companies must recognise the increased gratuity liability in their financial statements for the quarter ending December 31, 2025. Since the Labour Codes came into effect from November 21, 2025, the additional liability must be accounted for in line with Ind AS 19 or AS 15, as applicable, ensuring transparency in interim financial results.
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