Quick answer: Yes, the new Labour Codes apply to IT and ITeS companies and their employees. The parts that matter most are the 50% wage rule (which raises PF and gratuity and can lower take-home), gratuity on the revised wages from 21 November 2025, gratuity after 1 year for fixed-term staff, and salary paid by the 7th of each month. Large IT firms booked one-time charges of about ₹4,950 crore for the change in October-December 2025.
IT salaries are usually allowance-heavy, so the four new Labour Codes hit the sector harder than most. This guide explains which parts of the Codes apply to IT employees, what changes in your salary slip, gratuity and leave, how TCS, Infosys, HCLTech, Wipro and Tech Mahindra responded, and what to check in your own pay. A short section at the end covers bank employees.
Do the Labour Codes apply to IT employees?
Yes. The Codes apply to all employers, and IT/ITeS companies are not exempt. Some provisions apply to every employee, while others apply only to "workers":
- Apply to all employees: the wage definition and 50% rule, PF and ESI, gratuity, maternity benefit, timely payment of wages and appointment letters.
- Apply only to "workers": working-hour limits, overtime and annual leave under the OSH Code. "Worker" excludes people employed mainly in a managerial or administrative capacity, and supervisors drawing wages above ₹18,000 a month (Labour Ministry FAQs of 30 December 2025 and 16 March 2026; EY).
So whether the hours and leave rules cover you depends on your role, not on your company being in IT.
What changes for IT employees
| Area | What the Codes say |
|---|---|
| Salary structure | If allowances exceed 50% of total pay, the excess is added back to wages for PF, gratuity and bonus. |
| What counts in the 50% | Employer PF and pension contributions and statutory bonus count; gratuity and ESI do not (Ministry FAQ, 16 March 2026). Overtime allowance counts. |
| PF | Wage ceiling ₹25,000 a month from 17 September 2026 (earlier ₹15,000). See our PF wage ceiling guide. |
| Gratuity | Calculated on the revised wages from 21 November 2025. Fixed-term staff qualify after 1 year. Ceiling ₹20 lakh. |
| Salary date | For IT and ITeS, salary must be released before the 7th of every month (KPMG). |
| Appointment letter | Mandatory for every employee, with job details, wages and social security. |
| Annual leave (workers) | 1 day for every 20 days worked, after 180 days in the year; up to 30 days can be carried forward; no maximum limit on encashment (Ministry FAQ, 16 March 2026). |
| Working hours (workers) | 8 hours a day, 48 a week; overtime at twice the wage rate. |
Why take-home pay can fall
Many IT salaries are allowance-heavy. Under the 50% rule, the part of allowances above half of pay is added back to wages, so PF is calculated on a higher amount.
Example: a monthly salary of ₹50,000 with basic + DA of ₹20,000 and allowances of ₹30,000. Allowances exceed 50% (₹25,000) by ₹5,000, so wages for PF become ₹25,000. Employee PF at 12% rises from ₹2,400 to ₹3,000, and take-home falls by ₹600 a month. The employer's PF rises by the same amount, and gratuity is worked out on ₹25,000 instead of ₹20,000. Our pros and cons guide works this through, and the new labour code salary calculator checks your own structure.
How the big IT companies responded
The largest IT firms recorded one-time charges in their October-December 2025 (Q3 FY26) results, mainly for higher gratuity and leave liabilities on past service:
TCS booked the largest one-time charge
One-time impact of the Labour Codes reported in Q3 FY26 results, ₹ crore
Sources: Business Today (TCS), PTI via DT Next (Infosys), HCLTech investor release, Outlook Business (Wipro), Angel One (Tech Mahindra).
- TCS said in July 2026 that it had aligned salary structures with the Labour Code requirements (Business Today). In May 2026 some employees said their monthly pay had fallen after the restructuring (People Matters).
- Infosys described its charge as an increase in gratuity liability for past service and in leave liability.
- Reports say the salary changes are not limited to TCS, and that higher PF lowers in-hand pay across the sector (Moneycontrol, via Trilegal).
Gratuity for IT employees
- Permanent employees: the five-year condition still applies. It is waived only on death, disablement or the end of a fixed-term contract (Ministry FAQ 11, 30 December 2025).
- Fixed-term employees: eligible after 1 year of service under the contract.
- Amount: 15 days' wages for each year of service, on the last drawn wages as now defined, up to ₹20 lakh.
- From when: the revised wage definition applies to gratuity from 21 November 2025 (Ministry FAQ 6, 16 March 2026).
Calculate yours with the gratuity calculator, or read our gratuity under the new Labour Codes guide.
Working hours and state laws
The OSH Code caps working hours for workers at 8 a day and 48 a week. IT offices are also covered by their state's Shops and Establishments Act, and law firms point out that the Codes do not replace those Acts, which can differ on hours and leave (EY; Bar & Bench). For example, the Karnataka Act allows a 9-hour day.
- Karnataka extended the IT/ITeS exemption from standing orders until 10 June 2029. The circular said the IR Code would apply to these companies once the Codes took effect (India Briefing). Karnataka's Shops Act amendment of 4 September 2026 exempts establishments registered under the OSH Code from separate registration.
- Telangana exempts IT/ITeS from certain Shops Act provisions until 30 May 2028, with a 48-hour week (AZB & Partners).
How the OSH Code and state Shops Acts fit together for IT offices is not yet settled, so check your state's rules and your company's policy.
Bank employees
The Codes also apply to banks. For banking companies, the Central Government is the appropriate government, so the Central Rules 2026 apply. In October-December 2025, private banks made provisions such as ₹800 crore at HDFC Bank, ₹155 crore at Yes Bank and ₹145 crore at ICICI Bank. Business Standard reported that public sector banks' pay structures were already close to the new definition, so they needed no change (Business Standard, 18 January 2026).
What IT employees should check
- Your basic + DA share. If it is below 50% of total pay, expect your PF wages to rise.
- Your PF deduction on the payslip after the restructuring, and whether PF is on actual wages or capped at ₹25,000.
- Your CTC letter. TCS was reported to have moved gratuity out of the displayed CTC; check how yours shows it.
- Your appointment letter and whether it shows wages and social security.
- Your salary date: it should be released before the 7th of the month.
- If you are on a fixed-term contract, your gratuity after 1 year.
Related: pros and cons of the Labour Codes, Labour Codes latest news and state-wise Labour Code rules tracker.
Want to understand your new salary structure? The free course on salary calculation under the new Labour Codes explains the 50% rule with worked examples, with an optional certificate for ₹299. The New Labour Codes practical guide (eBook) covers all four Codes. Test yourself with the Labour Codes quiz.
Frequently asked questions
Does the new labour code apply to IT employees?
Yes. The wage rules, PF, gratuity, maternity benefit and appointment letters apply to all IT employees. Working-hour and annual leave rules apply only to "workers", which excludes managerial and administrative staff and supervisors earning above ₹18,000 a month.
Will my IT salary in-hand reduce under the new labour code?
It can, if your allowances are more than half of your pay. The excess is added to wages for PF, so your PF deduction rises and monthly take-home falls, though the money goes into your PF.
How much did IT companies spend on the labour code change?
In Q3 FY26, TCS reported ₹2,128 crore, Infosys ₹1,289 crore, HCLTech ₹956 crore at EBIT, Wipro ₹302.8 crore and Tech Mahindra ₹272 crore, mainly for gratuity and leave liabilities.
When will IT companies make basic pay 50%?
The Codes do not require basic pay to be 50%. They require allowances above 50% of pay to be added back to wages for PF, gratuity and bonus. Many firms are restructuring pay to comply; TCS said in July 2026 that it had aligned its salary structures.
Do the Labour Codes apply to bank employees?
Yes. For banks the Central Government is the appropriate government, so the Central Rules 2026 apply. Public sector bank pay structures were reported to be already close to the new wage definition.
Position as of 30 October 2026. Company figures are as reported in their results and the media cited. Your own salary depends on your employer's structure and your state's rules. General information, not legal or tax advice.