Indian IT’s Big Five face $500 million labour code hit to profitability
Tata Consultancy Services Ltd (TCS), the country’s largest software services provider, incurred additional costs of $238 million, while second-ranked Infosys Ltd announced an impact of $143 million, according to its quarterly earnings release. This was followed by HCL Technologies Ltd ($109 million), Wipro Ltd ($33.3 million) and Tech Mahindra Ltd ($30 million).
Together, the Big Five employ more than 1.5 million people, making the sector one of the largest formal sector employers in the country.
The Indian government implemented it in November last year Labor laws that require basic pay for employees to constitute at least 50% of total wages increase statutory payments such as provident fund and gratuity.
The requirement shaved 260-320 basis points off their profitability during October-December 2025, with TCS facing the biggest hit. A basis point is one hundredth of a percentage point. TCS, Infosys, HCLTech, Wipro and Tech Mahindra reported operating margins of 25.2%, 18.6%, 18.4%, 17.6% and 13.1%, respectively, in the quarter.
TCS management said the costs were non-recurring.
TCS chief financial officer Samir Seksaria said during the company’s post-earnings analyst call: “On the labor law front, we don’t expect (any future impact on profitability) unless the rules provide more clarity. There’s also another thing that needs to be (considered) because now the rules have come into effect and the guidance has come towards the end of December, we’ve made an assessment and we’ve done that and if there is a change in the understanding of our rules, we will announce that.” January 12.
But peers expect recurring costs.
“The recurring impact of this will be around 15 basis points on an ongoing basis,” Infosys CFO Jayesh Sanghrajka said during the company’s post-earnings analyst call on Jan. 14. He said current costs only take into account current legislation.
HCLTech CEO Vijayakumar also does not expect much impact from the labor law.
“We still need to run the business. We just need to comply with all the land we’re going to do. This will have no impact on our hiring plans,” he said at the company’s post-earnings press conference on Jan. 12.
Wipro’s management also had a similar view.
“Is there any ongoing impact of the labor code? Absolutely not. And if you really noticed, the impact of our Labor Code is perhaps one of the least compared to the industry,” Wipro’s CFO Aparna Iyer said during the company’s post-earnings press conference on Friday.
“That’s because we’re slowly and steadily trying to get closer to labor law, so we’re pretty well prepared and we’re doing what we need to do,” Iyer said. “I do not anticipate this will have an ongoing impact on our financial statements.”
The National Association of Software and Services Companies (Nasscom), the country’s IT industry body, said employees will now have greater clarity on their salaries, with letters of employment and fixed timelines for salaries to be provided.
As per labor law, it has now become a legal obligation for every employer to issue a formal, written appointment letter to all employees. Salaries must be paid on the seventh day of each month.
“For the technology industry and workforce, the eventual full implementation of the Code could bring greater predictability and transparency,” Nasscom said in a press release dated November 21, 2025. “Written appointment letters, fixed-term employment with equal rights, expanded coverage of social security, recognition of gig and platform work and special attention to timely salary payments, equal pay and structured grievance mechanisms for IT and IT-enabled services are particularly relevant to the skilled and mobile talent base.”
TCS had 582,163 employees. Infosys had 337,034 employees as of December. While the headcount at HCLTech was 226,379, Wipro and Tech Mahindra had 242,021 and 149,616 employees respectively.
