TCS, Infosys, HCLTech Book Over ₹4,000 Crore Hit from Labour Codes in Q3FY26

India’s 3 largest IT services companies, Tata Consultancy Services (TCS), Infosys and HCLTech reported a combined ₹4,373 crore in exceptional charges during the December quarter. 

The charges were linked to the implementation of the new labour codes that came into effect in November 2025. The additional costs led to a sharp decline in profits for all three firms in the quarter ended December 31, 2026. 

Changes Introduced Under the Labour Codes 

The 4 labour codes revised rules around wages, social security, working hours and employee benefits. For IT and ITeS companies, the changes required higher basic pay, compulsory appointment letters and social security coverage for fixed-term employees. 

The codes also mandate that wages must form at least 50% of cost to company, with provident fund and gratuity calculated on this base. 

Infosys Reports ₹1,289 Crore Charge 

Infosys disclosed an exceptional charge of ₹1,289 crore in its December quarter results announced on January 14. The company said the charge was due to an increase in gratuity liability linked to past service costs and a rise in leave-related provisions.  

These adjustments were made to align existing employee benefits with the revised statutory framework. 

TCS And HCLTech Book One-time Adjustments 

TCS reported an exceptional charge of ₹2,128 crore on January 12, 2026. The company said around ₹1,800 crore of this amount was related to gratuity adjustments, while nearly ₹300 crore was attributed to leave liabilities. 

HCLTech reported an exceptional charge of ₹956 crore during the quarter. The company said this represented a one-time impact of about $109 million to comply with the labour codes. 

Effect on Operating Margins 

TCS reported a sequentially flat operating margin of 25.2% in the December quarter. HCLTech recorded an operating margin of 18.6% higher than the previous quarter. 

Infosys reported an operating margin of 18.4%, down from 21% in the September quarter. The company said its margin would have been about 21.2% without the labour code-related costs. 

Read More: TCS Sees ₹2,128 Crore Impact from New Labour Codes in Q3FY26! 

Conclusion 

The December quarter captured the immediate accounting impact of the new labour codes on large IT companies. Most of the costs related to adjustments in gratuity and leave liabilities arising from past service. 

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