Analysts said, according to the new code, there will be a restructuring in the salary structure and there should be an increase in the share of contribution towards basic pay, and other key allowances.
Illustration: Uttam Ghosh
Key Points
- Private-sector insurance companies have also had to make additional provision owing to the new labour Codes
- Salary structure of public sector banks was close to the new structure
- Lenders have estimated an incremental impact on their profit & loss accounts
Effect of Labour Code on private banks and insurance cos
The new labour Codes, notified by the central government in November 2025, have pushed up employee costs for private-sector banks and insurance companies, with these firms reporting higher operating expenses in the October-December quarter (Q3FY26) due to the statutory impact of the new labour Codes.
HDFC Bank, the country’s largest private sector lender, reported operating expenses of Rs 18,770 crore in Q3FY26, compared to Rs 17,110 crore in Q2FY26.
“The bank has recognised an estimated incremental impact of Rs 800.00 crore under ‘Employees cost’ in the profit & loss account during the quarter and nine months ended December 31, 2025, considering best information available.
“The bank continues to monitor the finalisation of Central and State Rules and clarifications from the government on the new labour Codes, and would provide appropriate accounting effects on the basis of such developments, as needed,” HDFC Bank said in its exchange filing.
Similarly, ICICI Bank estimated an impact of Rs 145 crore to their profit and loss account in Q3FY26, due to the new labour Codes.
Yes Bank has also accounted for an incremental impact of Rs 155 crore, while Federal Bank has made provision of Rs 20.8 crore and RBL Bank estimated an additional impact of Rs 32 crore, owing to the new norm.
Private-sector insurance companies have also had to make additional provision owing to the new labour Codes.
HDFC Life Insurance estimated an incremental amount of Rs 106.02 crore towards employee benefits, which has been charged to the Consolidated Revenue Account.
ICICI Prudential Life Insurance estimated an incremental amount of Rs 11.04 crore, and ICICI Lombard General Insurance has estimated an impact of Rs 53.06 crore due to the new Labour Code.
On the other hand, the salary structure of public sector banks was close to the new structure, and therefore they need not make any changes or additional provision towards the same.
Analysts said, according to the new code, there will be a restructuring in the salary structure and there should be an increase in the share of contribution towards basic pay, and other key allowances.
This would increase the amount that will be paid towards gratuity, and pension funds by the employers.
The 4 labour codes
In November 21, 2025, the Government of India notified four 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, collectively referred to as the ‘new labour Codes’, consolidating 29 existing labour Jaws.
The Ministry of Labour & Employment has published draft Central Rules and FAQs on December 30, 2025, to facilitate assessment of the financial impact arising from these regulatory changes.
Accordingly, the lenders have estimated an incremental impact on their profit & loss accounts
