Navigating the New Labour Landscape: Impact of India’s Labour Codes on the IT, GCC, BPO & KPO Sectors

Introduction

The Government of India’s notification of the four consolidated Labour Codes on 21 November 2025 marks the most transformative overhaul of labour legislation in independent India. With the enforcement of substantial and in many cases, complete provisions of the Code on Wages, 2019, Code on Social Security, 2020, Industrial Relations Code, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020, India has moved from a fragmented regime of 29 central laws to a unified, modern labour framework.

While these reforms affect employers across sectors, their impact on information technology (IT), Global Capability Centres (GCCs), Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) is particularly significant. These industries characterised by high workforce scalability, multi-shift operations, night-shift deployment, and extensive use of fixed-term and contractual talent must carefully assess the operational, financial and compliance consequences of the new regime.

Redefining Workforce Structure: Fixed-Term, Contractual & Platform Talent

The new Codes mandate a uniform and formalised employment structure across categories. Key Changes

• Introduction of appointment letters for all employees.
• Fixed-term employees must receive benefits on par with permanent employees, including social-security coverage for the duration of employment.
• Expanded definitions under the Social Security Code potentially bring certain outsourced, platform-based or gig-type engagements within statutory coverage.

Sector Impact

The IT/GCC/BPO/KPO ecosystem heavily relies on flexible staffing models like contractual resources, fixed-term tech specialists, project-based teams and contingent workers. These reforms will:

• Increase the cost of fixed-term and contract staffing, traditionally used to manage scale and seasonal spikes.
• Require reassessment of vendor contracts, service-level staffing, and resource allocation models.
• Demand more rigorous workforce classification to avoid inadvertent statutory liabilities.
• Organisations will need to redesign workforce strategy, balancing flexibility with mandatory benefits.

Wage Structuring, Overtime & Work-Hour Norms

The unified definition of “wages” under the Code on Wages affects payroll structures industry-wide. Key Changes

• Standardised wage definition impacts basic-to-allowance ratios.
• National floor wage regime.
• Overtime at twice the rate, enforceable through a structured working-hours framework.
• Workday can stretch to 8–12 hours within a 48-hour weekly cap, subject to conditions.

Sector Impact

Given the prevalence of multi-shift models, 24×7 client support and cross-time-zone servicing:

• Companies must recalibrate time-tracking systems, shift rosters, and overtime payouts.
• Night-shift operations, especially where women employees are involved, may require additional safeguards.
• Payroll recalibration may lead to higher employer contributions and altered take-home salaries at certain bands.
• This will be particularly material for large BPO/KPO employers with thousands of employees in rotational shifts.

Social Security Expansion: Wider Coverage and Higher Contributions

The Social Security Code significantly broadens the scope of statutory benefits. Key Changes:

• Mandatory coverage for a broader class of workers, including fixed-term and certain gig/platform workers.
• Formal digital registration and compliance obligations.
• Provident fund, maternity benefits, gratuity and insurance benefits extended comprehensively.

Sector Impact

• Employers may see increased PF/ESI contribution obligations, particularly in employee bands previously outside coverage.
• Vendor-managed or contractor-supplied personnel may trigger social-security liabilities if misclassified.
• This could influence cost structures in Tier-2/3 delivery centres, where margins are tighter.
• For GCCs, which often operate to strict global compliance norms, harmonising global and domestic benefit structures will be critical.

Industrial Relations & Organisational Flexibility

The Industrial Relations Code brings structural reform to dispute resolution, union recognition and separations. Key Changes:

• Threshold for prior permission for retrenchment/closure increased from 100 to 300 employees.
• Standing Orders rationalised and threshold raised.
• Formalisation of grievance redressal and employee-relations frameworks.

Sector Impact

Though the IT-ITeS ecosystem traditionally has limited unionisation, companies with large campuses and diversified service lines may now:

• Enjoy greater operational flexibility in restructuring.
• Need clearer documentation and internal processes around performance-based separations, disciplinary actions and terminations.
• Implement transparent grievance redressal systems that meet the new Code standards.
• This formalisation is likely to reduce disputes and enhance governance.

Workplace Safety, Night-Shift Policies & Contract Labour

The OSH Code consolidates 13 laws and applies even to office-based IT environments, not just manufacturing. Key Changes:

• Broader applicability to commercial establishments.
• Welfare requirements for women in night shifts.
• Contractor licensing and responsibility matrix strengthened.
• Standardised norms for workplace safety, health audits, rest facilities and working conditions.

Sector Impact

• IT campuses, GCCs and large BPO delivery centres must ensure compliance on health, safety and welfare, especially for 24×7 operations.
• Organisations must revisit transport policies, security arrangements, and women-safety measures for night-shift employees.
• Facilities management, security, catering and other contract-staff operations must comply with strengthened contractor licensing rules.
• This pushes companies to align physical and digital workplace safety with global standards.

Cost, Operations & Compliance Governance

The Codes collectively require re-engineering of HR, payroll, compliance and workforce planning systems. Likely Impacts:

• Higher compliance costs due to statutory benefits, overtime rates, digital filings and social-security contributions.
• Need to overhaul HRMS/payroll software to reflect new wage structures and time-tracking norms.
• Greater scrutiny on vendor management, especially third-party staffing and facility-management contracts.
• Workforce planning will require modelling to optimise staffing levels and avoid excessive overtime overhead.
• However, the predictable and uniform structure may enhance India’s competitiveness as a global services hub.

Opportunities: The Codes as a Catalyst for Global Compliance & Employer Branding

Despite the cost and compliance implications, the Codes offer significant opportunities:

• A modern and simplified labour law regime improves India’s Ease of Doing Business attractiveness for GCCs.
• Enhanced social-security protections may improve retention and reduce attrition in BPO/KPO roles.
• Streamlined compliance frameworks will appeal to global clients concerned with ESG, worker-welfare and ethical-sourcing standards.
• Uniformity across states reduces legal fragmentation and improves scalability for multi-city operations.
• For organisations positioned strategically, the Codes may become a competitive differentiator.

Conclusion

India’s labour-law reform is a structural inflection point. For the IT, GCC, BPO and KPO sectors that are the engines of India’s digital economy, the new Codes bring both costs and opportunities. The transition will require systematic changes in workforce management, payroll, benefits administration, compliance architecture and vendor oversight.

Yet, by embracing this reform proactively, companies can build resilient, compliant, globally aligned employment frameworks that strengthen both operational efficiency and employer reputation.

Contributed by – Rohitaashv Sinha