New labour codes likely to cut down your next salary hike

This year firms are more optimistic but steady inflation has provided them no reason to push for higher increments, the paper said citing headhunting and staffing agencies.

Indian companies are likely to provide a hike of 8.5 percent to 9.5 percent to their employees in the next appraisal cycle as the new labour code takes effect and inflation remains stagnant, a Mint report said on December 17.

The report said 2026 is expected to remain an employer’s market, excluding some sectors such as pharma and consumer industries.

The average increments have eased after the hiring frenzy of 2021 and 2022, when the hikes jumped to 9.7 percent and 10.6 percent, respectively, the newspaper said.

This year firms are more optimistic but steady inflation has provided them no reason to push for higher increments, the paper said citing headhunting and staffing agencies.

However, the new labour code has made companies factor in additional expenses on employees.

The report said the implementation of the new codes could lead to higher social security contributions, driving up costs. Under the new codes, taxable income and contributions to superannuation will increase, cutting down take-home salary and it will also have an impact the firms’ profit and loss as liabilities will grow due to leave and gratuity. In addition, the new codes require companies to provide free medical checkups to all the employees aged 40 and more, which could add to the cost burden.