Business & Finance

India’s Employment Landscape Shifts Amid AI Adoption, Skill Gaps and New Labour Codes

By The Times Of India

India’s employment environment is undergoing a fundamental shift, with focus moving from job quantity to job quality, required skills, security and workforce readiness. Three key forces drive this change: rapid AI adoption, widening skill gaps, and the implementation of new labour codes. The latest TeamLease Employment Outlook Report for HY2 FY 2026‑27, based on a survey of 1,239 businesses across 23 industries and 20 cities, projects a Net Employment Change of 5.4%, up from 4.7% in HY1 FY 2026‑27. Sixty percent of employers plan to expand their workforce, compared with 58% in the previous half‑year, but the expansion is becoming more selective.

AI is expanding work possibilities. It improves operational efficiency, supports decision‑making and changes routine tasks. As organisations integrate AI, employees are increasingly expected to work alongside these tools, adapt to new processes and develop complementary skills. The report notes that 85% of employers use AI or generative AI tools, yet only 13% report adoption across more than half their workforce; 54% limit usage to a quarter or fewer employees. Most common adoption is 11‑25% of staff, indicating AI deployment is largely concentrated within specific functions rather than across entire organisations. AI is layered onto existing roles—such as routing in logistics, assisted diagnostics in service networks and query handling in customer operations—rather than fundamentally changing every job.

The biggest challenge remains the skills gap. Digital literacy is the most sought‑after competency, with 59% of employers prioritising it, followed by customer experience management (51%) and communication skills (48%). Teamwork, collaboration and adaptability each feature at 44%. These skills are not limited to technology roles; they are increasingly required across blue‑ and white‑collar jobs. For example, warehouse workers must navigate digital inventory systems, while retail staff must use digital payment, reporting and customer engagement platforms.

Employers planning expansion anticipate significant or moderate hiring difficulty in 72% of cases. IT faces the highest difficulty (39%), followed by Sales and Marketing (38%), Engineering (32%) and blue‑collar roles (31%). The disconnect between available talent and required capabilities remains a major issue.

Labour reform is the third force shaping the landscape. The four new Labour Codes, effective 21 November 2025, consolidate 29 central labour laws and aim to simplify employment frameworks, strengthen formalisation and bring consistency to practices. The report shows 39% of employers cite increased compliance and payroll administration effort as the main impact, followed by higher statutory contribution costs (35%). Twenty‑eight percent anticipate moderated salary increments due to higher employment costs, and an equal proportion foresee possible reductions in employee take‑home pay from salary restructuring. These changes affect the relationship between take‑home pay and long‑term social security contributions, especially where salary structures have lower basic pay and higher allowances.

The reforms also offer an opportunity to strengthen formal employment practices, improve compliance and extend protection to workers, including those in gig and platform‑based work. Transparency in compensation changes is critical to help employees understand the impact on their earnings and financial security.

Hiring momentum is strongest in digital‑first and consumer‑facing sectors. E‑commerce and technology start‑ups record a Net Employment Change of 12.6%, Travel and Hospitality 12.3%, and Retail 10.3%. Automotive, EV and EV infrastructure also show strong hiring, with Net Employment Changes of 10.1% and 9.7% respectively.

The broader opportunity is to create an employment ecosystem where people can access opportunities, develop relevant skills, earn fairly and build sustainable careers. This requires collective effort: employers investing beyond immediate hiring needs, governments ensuring reforms translate into meaningful worker protection, educational institutions aligning learning with industry demands, and employees embracing lifelong learning. Expanding opportunities to emerging industrial hubs, Tier‑2 cities and digitally connected smaller markets can help distribute employment more widely.

Ultimately, AI will change how we work, skill gaps will determine who can participate in emerging opportunities, and labour reforms will influence the quality and security of employment. Addressing these forces together is essential for India to realise its demographic advantage and build a more empowered workforce.