The new labour law that comes into effect from January 15, 2022, mandates 75 percent reservation for local people in private sector jobs where the salary is less than Rs 30,000 a month.
With Haryana’s new labour law that mandates 75 percent reservation for locals set to come into effect from January 15, 2022, it might end up benefiting its Noida, as IT companies and startups are looking to leverage hybrid models and move to these nearshore locations address the challenges.
This is despite the reduction in the wage band to Rs 30,000 from Rs 50,000 that had been announced earlier.
Haryana new labour act
On March 2, 2021, the state government passed the Haryana State Employment of Local Candidates Bill that mandated 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 companies with more than 10 employees and for newer candidates they are hiring. This law is aimed to address rising unemployment in the state and will be applicable for 10 years.
Under the bill notified on November 6, the government reduced the monthly salary rider to Rs 30,000, bringing some respite to the IT/ITeS sector. While there are also reports that there will be a two-year moratorium for startups and new businesses in the state, there has been no official notification from the government.
According to industry experts, while the reduction in the salary cap will provide a measure of relief to the IT/ITeS sector and startups, the situation still presents a challenge for smaller companies especially at a time of high attrition amid a war for talent. In addition, Haryana is a key region for the tech ecosystem in India.
Gurugram’s tech ecosystem
According to a report by IT industry body NASSCOM, there are over 500 IT/ITeS companies in Haryana—almost entirely located in Gurugram—that employ about 4 lakh people. IT services account for about 34 percent of the jobs, followed by global capability centres at 21 percent and BPO companies with close to 19 percent. E-commerce accounts for about 6 percent of the employment and software products at 14 percent of the total IT and tech employees in Haryana.
The report, which was released in March based on responses from 73 companies, said that if the law comes into effect, it will affect 1.5 lakh employees in the 1-2 years’ experience bracket for the Rs 50,000 salary range. The report also added that 80 percent of companies will be negatively affected, and many are looking to shift their operations to other states.
NASSCOM did not respond to Moneycontrol’s query on whether the lower pay criterion lessened the impact and by how much. However, experts Moneycontrol spoke to said the even though the number of jobs affected would come down significantly with the reduction in the salary band, it still could hurt new hires, especially in the BPO sector and also in the case of some freshers.
Impact on jobs
According to experts, the impact will be felt by smaller companies and BPOs, where the salary for fresh hires are less than the Rs 30,000 cap mandated by the government.
According to platform Payscale, the average salary of BPO employees is about Rs 2.96 lakh annually, which translates to less than Rs 25,000 per month. In the case of freshers in IT, the average salary is about Rs 3.5 lakh, putting it just under Rs 30,000 a month.
Sunil C, head, specialised staffing, TeamLease Digital, said, “As a country meritocracy is important. By reserving jobs for locals, you are actually closing a door for outsiders. They will move to other places.”
Even if the salary cap is lowered, hiring new candidates is still challenging under the new rule. He explained that unlike the reservation in universities, private companies cannot fill in the roles for the sake of reservation and skills are important. “Candidates are evaluated for what they are. There is still a filter of performance,” he said.
What are companies doing?
Some startups are moving to Noida as the new rule comes into effect. According to Akshay Chaturvedi, founder and CEO of Delhi-based LeverageEdu, the new labour bill was a factor behind the company’s decision to move to Noida instead of Gurugram as part of its scaling-up operations.
Staffing companies that cater to the IT/ITeS sector Moneycontrol spoke so said firms are currently evaluating options such as leveraging a hybrid work model and also moving to nearshore facilities such as Noida and other regions.
A Bengaluru-based recruiter with a top staffing firm said that though the government has notified the rule, companies are yet to react. “These things have not come into play yet since companies are still in working from home mode and job roles are location-agnostic. As things open up, we expect more to ask for Gurugram-specific requirements, but companies will leverage hybrid work models to get around the policy,” he said.
Another recruiter from a Bengaluru-based staffing firm said, “ITeS/BPO might be impacted but it is still a wait and watch as none of our clients have reverted on this. For IT clients, capping of Rs 30,000 is too low except graduate hires, which the companies will tweak.” The recruiter explained that the Rs 30,000 salary bracket can be tweaked to Rs 31,000-32,000 to dodge the quota.
