India's information technology (IT) industry is facing significant financial pressure following the implementation of the country's new labour codes, with global brokerage firm Jefferies warning of a potential 10-20% reduction in December-quarter profits for the sector. The Economic Times article accurately reflects this warning, which is corroborated by several other financial news outlets. The four new labour codes—the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions Code, 2020—became effective nationwide from November 21, 2025. A key provision driving the financial impact on IT companies is the redefinition of 'wages,' which now mandates that at least 50% of an employee's Cost to Company (CTC) must constitute their basic wages. This change directly affects the calculation of statutory benefits like provident fund and gratuity, leading to higher employer contributions. Furthermore, the new regulations extend gratuity benefits to fixed-term employees after just one year of service, a significant reduction from the previous five-year requirement. Companies are also compelled to recognize sharply higher gratuity and leave-encashment liabilities as a one-time adjustment. Jefferies' analysis highlighted that these changes would result in a structural increase in recurring employee costs for IT firms, alongside immediate one-time financial hits. The impact has already been evident in the latest quarterly results of major IT players. Tata Consultancy Services (TCS), India's largest IT services exporter, reported an exceptional charge of ₹2,128 crore in its Q3 FY26 results, primarily due to the labour code implementation, contributing to a 13.91% decline in its consolidated net profit for the quarter. Similarly, HCLTech reported an 11.2% drop in consolidated net profit, attributing ₹719 crore to a one-time provision linked to the new labour codes. While the codes aim to enhance worker welfare and formalize employment, their immediate effect on corporate profitability, particularly in the labour-intensive IT sector, is substantial.