Investors voice concern over Haryana law on local hiring

Move could trigger exodus of large domestic, global firms, say experts

November 07, 2021 09:23 pm | Updated 09:59 pm IST - NEW DELHI

Flowers bloom during the winter season as a thick layer of smog engulfs Gurugram.

Flowers bloom during the winter season as a thick layer of smog engulfs Gurugram.

The Haryana government’s law to reserve 75% jobs for locals, notified on Saturday, could trigger an exodus of large domestic and multinational investors across sectors such as auto, IT that rely on highly skilled manpower, Indian industry has warned.

The law that kicks in from January 15, 2022, requires firms with 10 or more employees to reserve 75% of all jobs offering a salary of less than ₹30,000 a month for eligible candidates of State domicile. The salary ceiling was earlier proposed to be ₹50,000 for the law. that stems from an electoral promise by the BJP’s ally the Jannayak Janta Party in the 2019 Assembly election.

The move to regulate hiring of those earning less than ₹30,000 a month, is aimed at disallowing the influx of talent from other parts of the country even in sectors like IT and IT-enabled services (ITes), which the State does not have enough captive supply of, pointed out Amitava Ghosh, co-founder & principal partner at SSA Compliance Services LLP.

PHD Chamber of Commerce and Industry president Pradeep Multani said Indian industry needs the most efficient work force to stay competitive in a globalised word.

“We believe that any Indian should be allowed to work in any State of India without any restrictions,” he said. “We have already lost out to Sri Lanka and Bangladesh in textiles and MNCs moving out of China have not come to India but shifted to Vietnam, Indonesia, Thailand, Sri Lanka and Bangladesh,” he noted.

“The 75% reservation will result in moving out of tech and automotive companies, especially MNCs as these are highly skilled manpower-based companies,” Mr. Multani said, suggesting that instead of compelling firms to hire locals, the State can consider giving a 25% subsidy to firms as an incentive for hiring locals.

Mr. Ghosh said the law is already tilting the scales for large firms, particularly in e-commerce, IT & ITeS and new manufacturing sectors, who had chosen Gurugram as a hub for their businesses. Moreover, imposing the reservations on gig and platform companies could create a crippling talent crunch, he pointed out.

“Raising the son of the soil issue and preventing free movement of manpower resources in the State from other regions is sure to have a tremendously adverse effect on the existing industries in the State. This may force those tech giants and other industries to shift their base from Haryana to other States and drain out the State’s monetary resources to that extent,” Mr. Ghosh emphasised.

“If other States take Haryana’s cue and follow suit, there would surely be an extreme level of talent crunch across industries and across the country,” he said, stressing that such electoral promises for job reservations will affect the economy at this critical juncture.

In April, the PHD Chamber had urged the Haryana government to consider lowering the original salary ceiling of ₹50,000 a month to ₹15,000 a month on a 'cost to company' basis and raise it in tandem with efforts to improve skill sets in the State. It had also suggested that the reservation, if any, should begin from 20%-25% as technical and specialised skill sets will take time to inculcate among the State's youth.

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