The biggest cost driver is the revised definition of wages. Under the new rules, companies must ensure that an employee’s basic salary is at least 50% of total compensation.
Earlier, most firms kept basic pay relatively low and allocated a higher share to allowances, which helped reduce contributions towards provident fund, gratuity, and leave benefits.With the new definition mandating a 50% basic salary, these statutory payouts automatically increase.
The new law also makes annual health checks mandatory for employees above the age of 40. This alone may add around ₹1,000-₹2,500 per employee each year, increasing the health-related cost burden on companies.
Additionally, compliance-related manpower and process requirements are expected to rise.
According to the Business Standard, these changes could result in a 5-10% increase in overall payroll costs for IT and ITES companies.

