Haryana’s private job reservation law might push IT-BPO, tech companies and their young workforce to shift their base to other regions, impeding the fast growth that the state has witnessed in recent times, say staffing experts.
According to them, while the move might earn the political parties brownie points in the short-term, it will affect investment in the long run for the region.
The new law
On March 2, 2021, the State government passed the Haryana State Employment of Local Candidates Bill that mandates 75 percent reservation for local people in private sector jobs, where the salary is less than Rs 50,000 a month. This rule will be applicable for 10 years and aims to address rising unemployment in the state.
It will impact the IT and BPO sector as well, as they employ a large number of freshers, whose salary is less than Rs 50,000.
Tech ecosystem in Gurugram
After Bengaluru, the National Capital Region (NCR) comprising New Delhi, Noida and Gurugram, is the fastest growing tech ecosystem in the country.
Said Sunil C, Head – Specialised Staffing, Teamlease Digital, “Gurugram accounts for about 5 percent of the overall BPO workforce in the country.” All major IT and BPO firms such as Genpact, Infosys, TCS, HCL Tech and Wipro have offices in the region.
For IT and tech firms, the timing could not have been more inopportune. It comes when the demand for talent is outstripping supply and companies are stepping up their hiring across different levels.
For instance, Infosys increased its initial recruitment plan of 15,000 campus hires to 24,000 as the demand increased. TCS will employ 40,000 freshers, and HCL Tech plans to take in 15,000 new staffers from campuses in FY22. Wipro has not disclosed their numbers so far.
According to job portal Indeed.com, the average salary for newcomers in IT could range anywhere between Rs 12,000 and Rs 40,000 in the country.
The new law will pose a challenge and is likely to impact hiring plans as the companies might have to take into account the new rule, Sunil said.
While the bigger players might be able to move these freshers to one of their multiple campuses, smaller firms that have offices only in Gurugram or other parts of Haryana, will either be forced to open a secondary office in other parts or settle for talent that might not give them the competitive edge, said Pareekh Jain, founder, Pareekh Consulting.Inability to access quality talent is a far more grave concern for tech firms, which are people intensive. Sanjeev Bikhchandani, founder, Info Edge, said in a tweet, “It is not a good idea for states to restrict the labour markets.”
For India to realise its true economic potential it is important that the the markets for all four factors of production are free - Land, labour, capital and entrepreneurship. Not a good idea for states to restrict labour markets
— Sanjeev Bikhchandani (@sbikh) March 2, 2021
More practical challenges
There are more practical challenges as well.
It is not clear if there are any exceptions to this rule. There is also not much clarity whether the companies will have to overhaul the entire workforce to comply with the 75-percent-locals rule or if it's applicability would be restricted only to the new joinees.
Companies are not sure about the time period for compliance either. “Either way there are practical difficulties,” admitted Aditya Narayan Mishra, CEO, CIEL HR Services.
He pointed out that “Currently organizational systems are not designed to identify a person’s domicile. So firms might have to invest money to upgrade the system to enable identification to comply with the law. But there is no advantage for the companies to do that.”
Take for instance CIEL HR Services, a staffing firm. Of the 12,000 employees on the company’s rolls, about 3,000 are in Gurugram and 95 percent of them are below the Rs 50,000 wage band.
“I am just waiting for the fine print to come out. We will have to come up with necessary changes internally to comply with it,” stated Mishra.
Gurugram will no longer be attractive
Such restrictive laws will definitely make the region less attractive for investments.
The consultant quoted earlier, pointed out that state politics might weigh in when companies are looking to establish their presence in India or expanding their footprint. Restrictive policies will make Gurugram less alluring compared to other places.
Sunil of Teamlease Digital said that talents might move to cities that are less restrictive. “They will choose other regions, where opportunities are plenty,” he added.Vikram Ahuja, co-founder, Talent500 by ANSR consulting, said that though it is still early, some of his company’s clients are already talking about moving from Gurugram to Delhi to open a secondary office.