New labour codes will spike total employment costs by 64% in H1 FY2026–27
80% of employers are revising salary structures to meet the 50% wage definition
Net Employment Change is projected to rise by 4.7% despite compliance restructuring
India’s newly-implemented labour codes are expected to significantly reshape employer cost structures, with total employment costs projected to rise by around 64% in the first half (H1) of FY2026–27, according to Teamlease’s ‘Employment Outlook Report.’
The report suggests that following the implementation of the new labour codes, companies are primarily responding through cost and compliance restructuring rather than layoffs, indicating a shift in how businesses are adapting to regulatory changes.
2 March 2026
Get the latest issue of Outlook Business
As part of this transition, around 80% of employers are revising salary structures, 34% are moderating wage growth, 62% are upgrading HRMS, payroll, and statutory reporting systems and 56% are tightening time and attendance controls.
Additionally, 36% of firms are turning to automation to offset rising costs, while 20% are strengthening contractor and vendor compliance mechanisms.
Commenting on the cost implications, Balasubramanian A, Senior Vice President at TeamLease Services, said that the increase is largely driven by structural provisions such as the 50% wage definition, which raises contributions toward provident fund, gratuity, and other statutory benefits.
He added that “firms are also seeing cost pressures from salary restructuring and compliance upgrades required to align with the new framework.”
India’s new labour codes mark a sweeping reform that consolidates 29 laws into four unified frameworks covering wages, industrial relations, social security and workplace safety, with the aim of simplifying compliance while expanding worker protections.
Top Hiring Industries
The report highlights that India’s labour market is transitioning from a recovery phase to structured expansion rather than witnessing a broad-based hiring boom.
Net Employment Change (NEC) is expected to rise to +4.7% in H1 FY2026–27, up from +4.4% in the previous half and +2.8% earlier. Around 58% of employers plan to increase headcount, 26% expect no change and 16% anticipate reductions.
Hiring is increasingly becoming capability-driven, with a focus on productivity, digital skills, compliance and revenue-linked roles.
Balasubramanian further noted that workforce redesign is largely taking place within existing employment frameworks rather than through workforce reductions, with companies prioritising compliance alignment and compensation restructuring.
He emphasised that “overall hiring intent remains expansionary, with 58% of employers planning workforce growth, 26% expecting no change, and 16% anticipating reductions, indicating that entry-level hiring cuts are not a widespread trend.”
Top Hiring Sectors
Demand for talent is concentrated in high-growth sectors. E-commerce and technology start-ups lead with 80% of employers planning expansion and a Net Employment Change of +8.9%. This is followed by healthcare and pharmaceuticals at 78% growth and +7.0% NEC, and manufacturing, engineering, and infrastructure at 70% growth and +6.6% NEC.
Other sectors showing strong hiring momentum include logistics (+6.4%), agriculture and agrochemicals (+6.0%), power and energy (+5.9%), and construction and real estate (+5.9%).
What will Drive Hiring Momentum?
Large enterprises are emerging as the primary drivers of hiring, while smaller firms remain cautious.
Around 74% of large companies expect to expand their workforce, compared with 57% of medium enterprises and just 38% of start-ups and small businesses. This disparity reflects differences in capital access, liquidity resilience, and the ability to leverage policy incentives, with larger firms better positioned to translate investment visibility into hiring.
Hiring momentum is also being supported by a combination of macroeconomic and policy factors. Economic conditions are cited as the primary driver by 67% of employers, followed by organisational dynamics (43%), technological advancements (40%), policy changes (37%), skill requirements (35%), workforce productivity (31%), and seasonality (30%).
The report links these trends to sustained public capital expenditure, improved demand visibility, expansion of global capability centres, increasing adoption of artificial intelligence, and supportive policies such as labour code implementation and production-linked incentives.
Most Lucrative Roles
The nature of hiring is also evolving across functions. Sales and marketing roles are witnessing the strongest growth, with 54% of employers planning expansion compared to 20% expecting reductions.
IT roles remain important but are undergoing recalibration, with 40% planning growth, 24% reductions, and 36% no change. Finance functions are also strengthening, with 39% growth. In contrast, engineering roles are largely stable, while blue-collar hiring remains steady.
Back-office, administrative, and HR functions are showing limited expansion, with a majority of employers indicating no significant change, pointing to a structural plateau in these areas.
