Vocal for locals: After Haryana's 75% diktat, more companies look to hire locals in India's manufacturing hubs

Prior to this, companies only shared the hiring numbers with HR firms and not any fixed percentage to hire local staff.

Moneycontrol had reported earlier how state governments in Andhra Pradesh, Gujarat, Maharashtra and Karnataka have been informally asking companies to hire local candidates wherever possible. The Coronavirus outbreak and migration of workers has accelerated this process.

Political parties have also been subtly nudging these companies to hire locals for their manufacturing setups. This is to boost local employment and reduce unemployment even among those youth with basic skills.

Who is being hired?

Hiring companies are seeing a rise in request for getting between 20-25 percent talent at the factory level from local areas. Manufacturing hubs in Andhra Pradesh, Gujarat and Maharashtra have taken a lead, with Delhi-NCR also catching up.

The human resource executive of a large electrical goods company in Gujarat told Moneycontrol that local hiring is not just cost-effective, but there are ‘hidden benefits’, too.

“We are aggressively expanding our manufacturing. So, hiring locally also means that we will be able to convince state authorities to get faster approvals to set up and expand our existing factories, since it will help generate employment,” he added.

However, it is to be noted that local hiring is mostly focussed on the shopfloor level where workers are semi-skilled, or in security or administrative posts. For technical talent, there is no restriction, though companies in the consumer electronics and automotive space are also considering local engineering institutes in the state.

So, this means that if a highly-skilled worker for designing a product is required, local talent may not possess the requisite skills. In such cases, contracts are extended to prospective job seekers from urban areas.

How is this helpful?

The first benefit to hire locals is saving costs. This is because relocation benefits or accommodation wouldn't have to be provided by the companies.

Khushnaz Sethna, a recruitment strategist for MSMEs in the Delhi-NCR region, said that knowing the local language is a must-have among the hires, especially at manufacturing facilities because it helps in better communication and faster turnaround times.

"In times of crisis like COVID-19 when workers migrate to their homes en masse, hiring locals would prove to be beneficial for companies. Some lessons have been learnt, and, hence, a lot of mid-sized and smaller production units are now opting for local talent," she added.

There is also a perception that local workers are more productive and avoid taking long leave during festivals.

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Paresh Tripathy, the human resource head of Noida-based contract manufacturing firm SwiftRight Technologies, which makes switches for household appliances said that outstation workers would typically take 7-10 days for big festivals like Eid or Diwali, taking into account the travel time involved.

“Since we have about 40 percent workers from Noida and outskirts, we have observed that their productivity levels are higher than outstation staff," he added.

Political factors also play a crucial role in this decision-making. The Chief Financial Officer of a global appliance major that has manufacturing presence in Andhra Pradesh and Maharashtra recounted that often the first question during meetings with the state governments is about hiring local talent.

“There is also a subtle nudge from these governments to hire at least a fixed percentage of skilled and semi-skilled workers from the locals, so that the state can also better employment records. We don't have a problem as long as large mandates like the 75 percent law in Haryana are not imposed," he added.

The Haryana government, led by Chief Minister Manohar Lal Khattar, has passed a law reserving 75 percent of private sector jobs for local youth. This is applicable for all jobs with a monthly pay of up to Rs 50,000 and for non-technical jobs.

Will there be formal policies?

This is not the first time that a job reservation policy is being mooted in India. Gujarat Chief Minister Vijay Rupani and Maharashtra Chief Minister Uddhav Thackeray have publicly spoken in 2018 and 2020, respectively, about their plans to have up to 80 percent reservation for locals in the private sector.

Here, locals are defined as those individuals who have been residing in the state for 15 years or above. In Maharashtra, Thackeray had, in fact, made this part of his party’s election manifesto in 2019.

In Andhra Pradesh, the government had passed a law in 2019, reserving 75 percent jobs for locals in government and private sectors. As of now, this policy exists only on paper.

However, with Haryana taking the lead, HR consultants are now seeing rising demand to hire locals in anticipation of policy changes in other states.

“In Gujarat and Maharashtra, especially, there have been several discussions with automobile components and electrical companies on the minimum percentage that they want to hire from local areas. The idea is that before the state government mandates it, companies want to show that efforts are being taken up independently," said Mahendra Sripathi, CEO at RightAssure HR Services, which provides staffing solutions to firms in Maharashtra, Gujarat and Goa in the manufacturing segment.