HRMS vs Traditional Payroll: Choosing the Right System for Your Business
17/04/2026Ever since the upgraded version of the 4 labour codes was launched in November 2025, the regulatory landscape has seen a major shift across sectors. The impact of Labour Codes on IT & GCC is going to be significant as they offer clarity on wages, fixed-term employment, work-from-home arrangements, & workplace safety standards.
As these reforms are in their early stages, GCCs and IT sectors can upgrade their existing compensation structures and workplace policies that align with the new labour codes before they escalate into expensive compliance shocks.
Let’s dwell on this further and understand the impact of labour codes on IT & GCC from an operational standpoint, especially in the areas of salary structuring, payroll processing, additional budgeting, best practices, and many more.
What are the New Labour Codes in India, and Why Do They Matter for IT and GCC companies?
The GOI consolidated 29 existing labour laws into a simplified framework consisting of four unified labour codes on 21 November 2025. These reforms aim to ease compliance, improve worker protection, & enhance ease of doing business.
Here is a consolidated table of new labour codes that will create a major impact on the IT and GCC sector in the current and future Indian business ecosystem.
| Labour Code | Year | Changes Observed for IT & GCC Companies | Key Impact of Labour Codes on IT & GCC |
| Code on Wages | 2019 | Standardizes salary structures across tech roles & locations | 50% wage rule increases PF, gratuity costs, & impacts CTC structuring |
| Industrial Relations Code | 2020 | Enables flexible hiring for project-based IT & GCC workforce | A threshold of 300 employees allows easier workforce scaling & restructuring |
| Code on Social Security | 2020 | Covers gig workers, freelancers, & contract tech professionals | Expands compliance to include the gig workforce, increasing employer obligations |
| Occupational Safety, Health & Working Conditions Code | 2020 | Applies to office-based, hybrid, & remote IT work environments | Standardizes working hours, leave policies, & safety norms across locations |
Here are 5 ways new labour codes will affect IT and GCC companies:
1. Simplified Compliance Framework
Consolidation of 29 laws into 4 codes brings down compliance complexity, enabling IT & GCC companies to streamline HR operations efficiently.
2. Impact on Salary Structures
New wage definition (50% rule) forces restructuring of CTC, increasing PF, gratuity liabilities, & affecting compensation planning strategies significantly.
3. Greater Workforce Flexibility
Higher threshold for layoffs and fixed-term employment enables IT firms and GCCs to scale workforce based on dynamic business requirements.
4. Expanded Social Security Coverage
Inclusion of gig & contract workers increases compliance scope, impacting IT companies relying on flexible or project-based workforce models.
5. Increased Compliance Scrutiny and Digitization
A unified framework with digital filings increases transparency, requiring IT and GCC companies to adopt automated payroll & compliance systems quickly.
How will Labour Codes Impact Salary Structure, Payroll Processing, and Costs for IT and GCC companies?
The impact of labour codes on IT & GCC is high in terms of employer costs, payroll processing approach, and compensation structuring. Here are 5 impact outcomes:
1. Restructuring of Salary Components
The new wage definition mandates 50% basic pay, which increases PF, gratuity contributions, and other CTC expenses for the employers. The labour code impact on employer cost will rise significantly with the implementation of the mandatory 50% basic rule.
2. Higher Statutory Contribution Costs
Increased basic salary raises employer contributions toward PF, gratuity, and other statutory benefits, impacting cost structures.
3. Changes in Payroll Processing Systems
Wage management systems must be updated to align with payroll compliance labour laws in India, laced with new amendments as defined by the 4 new labour codes.
4. Increased Compliance and Reporting Requirements
Payroll processing changes due to new labour codes call out for stricter reporting, digital filings, & real-time compliance monitoring.
5. Impact on Take-Home Salary and CTC Planning
The payroll impact of labour codes is significant when it comes to take-home salary. Higher statutory deductions bring down employee take-home salary, requiring careful compensation structuring and communication strategies.
What Changes in Social Security Benefits Under the New Labour Codes in IT and GCC Sectors?
| Area | Earlier Framework | New Labour Codes Changes | Impact on IT & GCC Companies |
| Coverage of Workforce | Limited to formal employees | Includes gig, platform, and contract workers | Expands compliance scope for flexible and project-based workforce |
| Provident Fund (PF) | Applicable to specific establishments | Wider applicability with a standardized wage definition | Higher PF contributions due to 50% wage rule |
| Gratuity Eligibility | Minimum 5 years of continuous service required | Fixed-term employees are eligible for gratuity without the 5-year condition. | Increases cost for short-term and project-based hiring. |
| Employee State Insurance (ESI) | Limited coverage based on wage threshold | Expanded coverage with potential inclusion of more workers | More employees fall under ESI, increasing employer contributions |
| Social Security Schemes | Fragmented schemes across laws | Unified and centralized social security framework | Simplifies compliance but increases reporting responsibility |
| Gig Worker Benefits | No formal benefits | Introduction of social security schemes for gig/platform workers | IT firms using freelancers must plan for additional compliance costs |
| Registration & Compliance | Multiple registrations required | Single registration and digitized compliance system | Reduces administrative burden, requires system upgrades |
| Funding Contributions | Employer-employee contributions mainly | Possible government-funded schemes for unorganized workers | Shared responsibility, but increased tracking and reporting are needed |
How do Labour Codes Impact Contract, Gig, and Fixed-Term Employees in IT and GCC Companies?
Here is the impact of labour codes on IT & GCC with respect to contract, gig, and fixed-term employees:
1. Expanded Coverage for Tech Gig Workforce
Labour code payroll changes extend social security benefits to gig developers, freelancers, & contract IT professionals across projects.
2. Gratuity Benefits for Fixed-Term Roles
Fixed-term IT employees become eligible for gratuity benefits without completing 5 years of continuous service.
3. Increased Compliance for Vendor and Contract Hiring
GCCs must ensure compliance tracking for third-party vendors, contractors, & outsourced workforce engagements.
4. Standardized Work Conditions Across Hybrid Roles
Uniform policies enforce working hours, safety, and benefits across remote, hybrid, & onsite tech employees.
5. Higher Workforce Costs for Flexible Hiring Models
Labour code impact on employer cost seems to be high when it comes to benefits administration in the IT and GCC sectors. Additional statutory contributions increase the overall cost of engaging contract, gig, & fixed-term tech workforce significantly.
How will Work Hours and Employment Flexibility Change Under Labour Codes in IT and GCC Sectors?
Here is the impact of labour laws on companies (IT and GCC) related to work hours and employment flexibility.
1. Flexible Work Hour Structures
The latest labour codes allow flexible working hours, enabling IT firms to adopt compressed workweek models efficiently.
2. Increased Maximum Working Hours
Daily working hours may extend up to 12 hours, with fewer working days per week (4 days with 12 hours, 5 days with 9.5 hrs, & 6 days with 8 hrs)
3. Formalization of Remote and Hybrid Work
Standardized policies support remote & hybrid work models across IT and GCC organizations effectively.
4. Clear Overtime Regulations
Defined overtime rules ensure fair compensation for extended work hours beyond prescribed limits.
5. Enhanced Shift-Based Workforce Flexibility
Companies can implement multiple shifts, enabling continuous operations aligned with global business requirements efficiently.
How can IT and GCC Companies Prepare for Labour Code Implementation?
Here are 5 ways to mitigate the negative impact of labour codes on IT & GCC
1. Revamp Salary Structures as per New Wage Rules
Align IT & GCC employee compensation structures to meet 50% wage rule, impacting PF, gratuity, & payroll calculations.
2. Upgrade Payroll and Compliance Systems
Put in place advanced payroll systems to maneuver new compliance prerequisites, automated filings, & accurate statutory calculations.
3. Conduct Comprehensive Compliance Audits
Audit payroll, policies &contracts periodically (every 3 months is the best timeframe) to identify chinks and make sure processes are ready to embrace labour code enforcement.
4. Train HR and Payroll Teams on New Regulations
Provide IT & GGC staff with continuous training on labour codes, compliance processes, & updated statutory requirements across teams.
5. Strengthen Vendor & Workforce Compliance Management
Ensure TPAs & contract workforce adhere to labour laws through strict compliance monitoring processes.
What are the Opportunities of Labour Codes for GCC and IT companies?
1. Simplified Compliance Framework
Consolidation of multiple laws into unified codes brings down compliance complexity & administrative burden significantly.
2. Enhanced Workforce Flexibility
Flexible hiring models enable IT & GCC companies to scale their workforce based on project demands.
3. Better Ease of Doing Business
Streamlined regulations & digital compliance systems boost operational efficiency & business scalability across regions.
4. Better Talent Utilization and Access
Inclusion of the gig workforce enables access to specialized skills & global talent pools efficiently.
5. Strengthened Employer Branding and Trust
Transparent compliance practices boost credibility, attracting top talent & building stronger employee trust.
How can Companies Manage the Labour Code Transition Effectively?
1. Establish Cross-Functional Implementation Teams
Create a dedicated deployment crew across HR, legal, finance, & operations to oversee seamless labour code transition.
2. Redesign Employment Contracts and Policies
Update employment agreements, HR policies, & documentation to be in line with new labour code requirements.
3. Implement Change Management and Communication Plans
Communicate changes clearly to employees, ensuring transparency, awareness, & smooth adaptation across the workforce.
4. Leverage Technology for Real-Time Compliance Tracking
Adopt compliance tools enabling real-time tracking, alerts, and reporting for labour code adherence.
5. Engage External Legal and Compliance Experts
Consult industry experts like Alp Consulting Ltd to interpret labour codes accurately & implement compliant business strategies effectively.
How Can Alp Consulting Help GCC and IT Sectors Implement New Labour Codes Effectively?
Alp Consulting Ltd, a pro payroll agency with 30 years of service prowess, helps IT and GCC companies implement new labour codes through expert consulting, payroll transformation, compliance audits, and policy redesign.
With advanced technology & deep regulatory expertise, Alp ensures the negative impact of labour codes on IT & GCC is minimal, along with seamless transition, accurate statutory adherence, reduced risks, and optimized workforce strategies aligned with evolving labour laws.
Frequently Asked Questions
1. How will labour codes impact payroll processing in IT companies?
Labour codes require payroll system updates, new wage definitions, increased compliance tracking, & accurate statutory calculations.
2. Are GCCs required to immediately comply with all four labour codes?
GCCs must comply based on phased state-wise implementation timelines, not necessarily immediate nationwide enforcement.
3. How do labour codes affect contract and gig workers in the IT sector?
Labour code payroll changes extend benefits, requiring IT firms to provide social security for gig workers.
4. Will labour codes increase operational costs for IT and GCC companies?
Yes, higher statutory contributions and compliance requirements increase overall payroll and operational costs significantly.
5. How can companies ensure a smooth transition to the new labour code framework?
Companies ensure smooth transition to the new labour code framework through planning, audits, technology adoption, & expert guidance for compliance.
Contact Us For Business Enquiry
Kishore V N
Kishore V N is the Managing Director at ALP Consulting, bringing over 29 years of extensive experience in global recruitment, talent strategy, and workforce solutions. He has been instrumental in building scalable RPO, MSP, and modular talent sourcing models that empower organizations with a competitive edge in talent acquisition. Kishore’s leadership focuses on expanding ALP’s global presence, driving innovation in recruitment technology, and enhancing operational excellence. He also serves as Director at Datacore Technologies, steering digital HR transformation through advanced HRMS and virtual staffing solutions.
