With the application of the labor codes, the wage bill of employers could increase between 1.5% and 10%, according to sector estimates.

“The labor codes will definitely affect employers’ wage bill due to various provisions on wages and gratuity. According to internal industry estimates, this could be in the range of 1.5% to 10%,” said a source close to the development.

Industry and employer associations have contacted the Ministry of Labor on these issues and hope that when the rules are finalized, they will address their concerns. Sources said the expectation is also that the flexibility offered by the new codes will help overcome short-term pain on the spending front.

“There are several positive features of the labor codes, such as flexibility in hiring and redundancies and a lower compliance burden that are expected to give a boost to investments,” the source noted, adding that some of the new provisions to benefit employees have also been realized as much needed.

The Ministry of Labor also on Wednesday issued the draft rules of the four Labor Codes that clarify the provisions relating to gratuity and bonus, the calculation of the minimum wage and the definition of wages. It has also released an FAQ on December 30 clarifying various issues, including the effective date and formula for payment of gratuity and definition of wages.

The Institute of Chartered Accountants of India has also said that companies will have to recognize increased liability for gratuity for the quarter ending December 31, 2025 as the labor codes came into force on November 21, 2025. AS 19/ AS 15,” it said in a recent FAQ.