IT services major Tata Consultancy Services (TCS) has blacklisted three staffing firms who were allegedly involved in bribing senior executives overseeing recruitment processes in the company to get business, sources in the know told Moneycontrol.
The sources cited above said the financial impact arising out of these violations is likely to be minimal, adding that this happened in the resource management group (RMG), which is different from its main talent acquisition group, that oversees the hiring function. People familiar with the company's inner workings say the RMG division brings in less than 1 percent of its workforce.
TCS confirmed the same in its exchange filings later saying, "The recruitment activities in TCS are not handled by the Resource Management Group (RMG) as alleged, therefore the reference to alleged scam in recruitment process is incorrect."
The company added, "RMG is responsible for allocation of available resources to various projects and incase of any shortfall, fill such requirements through contractors."
TCS' statements were in reference to an article published earlier in Mint, sharing details of senior executives in the RMG getting sacked for taking bribes.
According to the report, TCS sacked four senior executives from the RMG division following an internal investigation after a whistle blower alerted CEO K Krithivasan and COO Natarajan Ganapathy Subramaniam.
While E.S. Chakravarthy, the global head of RMG was sent on leave, one of the four other employees sacked included Arun GK who was heading one of the functions in the team, for taking commission from these HR firms, Mint said.
Sharing the findings of the internal investigation, TCS said that the issue relates to "breach of Company’s Code of Conduct by certain employees and vendors providing contractors; and no key managerial person of the Company has been found to be involved."
On those grounds the allegations does not involve "any fraud by or against the Company and (has) no financial impact," it added.
Sources told Moneycontrol, that these irregularities cited were US-centric, wherein TCS invested nearly a billion dollars to hire employees. All the three hiring firms are based in India and have offices in the US.
“Each of these US staffing partners make an average 25 percent margin on each hiring contract. This is actually a very rampant trend in the overall IT sector where the staffing companies end up paying one percent in commission to the procurement guys in the client company,” one of the sources cited above said, seeking anonymity.
“Around 80 percent of the subcontracting costs for the IT companies are coming from the US region,” the source added.
Another source said that the investigation was in fact going on for nearly four months.
According to the Mint report, the RMG division has an estimated headcount of 3,000 and places around 1,400 engineers including new hires on projects. TCS ended FY23 with 614,795 employees and $27.93 billion in revenue.
The news comes over a week after the TCS reported that a $2-billion deal for a period of 10-year was cancelled by the US-based Transamerica Life Insurance, citing macro environment challenges and changing business priorities. TCS got the deal in 2018 and the pending work will be wrapped up in the next two and a half years.
In its other major market, the United Kingdom, TCS bagged four mega deals in the first half of 2023. These include the $1.1 billion Nest deal, the $723-million deal from insurer Phoenix Group, the Marks & Spencer deal and the 10-year contract with the Teacher’s Pension Scheme in England and Wales.
(This article was updated to include TCS' statements. Staffing firm IDC Technologies' name was removed after the company got back with clarification.)
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