Indian IT majors face employment issues with local hiring in US

As Indian information technology (IT) majors aggressively hire local talent in the US, by far their largest geography in terms of revenue contribution, they are feared to face increasing incidences of employment-related legal issues in the country.

Industry insiders say that most of the local American employees, unlike their Indian counterparts, are not open to relocating to other cities within the country, even though this is one of the clauses in their employment contract. This gives rise to retrenchment in some cases and lands the employers in legal issues. Recently, Indian IT services major Tata Consultancy Services (TCS) successfully closed one such lawsuit filed by a former employee in the US.

In addition to these, relative shortage of IT talent in the US puts employers on the back foot, says Rituparna Chakraborty, co-founder, TeamLease. “Availability of quality talent in the geography is limited, so there is an upper hand in recruitment negotiations as well. However, since all locations within the country may not be equally attractive, it is possible for employees to change their mind about relocation at a later stage,” added Chakraborty.

In the case against TCS, the jury has rejected claims that the Indian IT firm preferred to staff its US offices with Indians and South Asians instead of Americans. The court ruling noted that “locals (in the US) demonstrate far greater resistance to TCS’ universal requirement as an IT consulting business for employees to relocate if the best role for them required it”.

“Executives testified that the ‘refusal to relocate’ is TCS’ greatest challenge in placing local hires (who by definition always have a US home) and that this is the single-biggest reason why ‘unallocated’ employees are terminated,” noted the ruling. TCS, with almost 30,000 employees in the US, is the largest employer among Indian IT firms in the country.

Despite Indian IT services companies making huge investments in expanding capability for doing local innovation and sourcing of talent in the US market, the allegations that they are biased towards South Asian professionals continue to haunt them. The number of incidents of such disgruntled former employees in the US taking legal recourse against Indian tech employers alleging discrimination is also on the rise.

In March this year, a complaint filed with the Colorado district court mentioned Wipro “has engaged in a pattern and practice of systematic termination of its American employees, in favour of Indian employees,” media reports said quoting the lawsuit. A similar lawsuit was filed against HCL Technologies around the same time.

Sensing the protectionist moves of the US Administration, Indian IT services companies have been steadily building up employee pyramid by hiring more engineering graduates from colleges, apart from inducting experienced hands.

Infosys and Cognizant (which had the largest number of H1B-approved visas in 2017) are the other companies facing similar lawsuits from disgruntled employees despite spending heavily on talent development initiatives in the US. While the companies also took to heavy sub-contracting to meet the talent demand in the country, it only pushed costs higher. Consequently, analysts have noted, the companies are preferring to utilise the employees on their payroll to the maximum extent and letting them go if it hurts business interests.

According to a CRISIL report, employees with H1B visas have been the core of Indian IT companies’ strategy as the wage cost comes around 20 per cent cheaper than hiring locals. Yet, the companies have been pushing for local hiring, owing to increasing scrutiny and rejection of visa applications.

The top four Indian IT services firms, industry experts say, have more or less met with their localisation targets in the US with a localisation ratio of over 60 per cent.