India, Jan. 16 -- Major Indian technology companies recorded a sharp decline in profits for the quarter ended 31 December 2025. Eventually this downturn stems from the central government's notification of the new Labour Codes on 21 November 2025. To comply with the updated legal framework, firms had to set aside substantial "one-time" provisions to cover increased employee benefit liabilities.

The primary cause of the profit drop is a fundamental change in how the law defines "wages." Under the Code on Wages, 2019, and the Code on Social Security, 2020, "wages" must now constitute at least 50% of an employee's total Cost to Company (CTC).

Historically, many IT firms structured salaries with a low basic pay and high allowances to manage ...