- The Haryana work reservation law is expected to have a massive effect on Gurgaon-based startups, as 67.3 per cent of workers earns less than Rs 50,000 per month.
- The transition will affect nearly 150,000 current IT employees and ITeS employees
- Given the industry’s high attrition rate, it could have a “serious” effect in the next 1-2 years.
Following the recent implementation of a work reservation rule, nearly 60% of Haryana-based startups reconsider their state’s potential investment plans.
A survey was released last week by IT industry lobby group Nasscom. It states about the New Haryana State Employment of Local Candidates Act, 2020, which stipulates 75 per cent work reservation for locals with a monthly salary of up to Rs 50,000 in the private sector. It said that it would result in the shifting or expansion of operations to other states that do not have such laws.
The legislation, which takes effect on May 1, is expected to impact startups significantly, as 67.3 per cent of workers earn less than Rs 50,000 per month.
Deeptech is used by 22% of Haryana startups, followed by Edtech by 20%, implying that they need high-end artificial intelligence and machine learning skills, which could be challenging to come by from the local talent pool, according to companies.
The startups have now petitioned the government to either repeal the law entirely or grant them an exception. They’ve also proposed lowering the limit to 10-30% or lowering the wage level to less than Rs 20,000.
“The Haryana Job reservation law also extends to companies with just ten employees,” said Nasscom’s Head of Public Policy, Ashish Aggarwal. “It would severely impede startups’ ability to attract the best talent, especially in tech-based startups where the majority of work is skill-based.”
Compliance with the legislation would also be challenging for startups. Aggarwal added that Gurgaon has around 700 tech startups that are less than five years old.
“Unintentionally, this law is likely to erode Gurgaon’s status as a startup hub in north India. These issues should be looked up by the government, according to Aggarwal. He added that startups’ situation is challenging because they are still finding it challenging to recruit the best talent due to market uncertainty and cannot compete on benefits with large corporations.
A majority of companies said they would consider moving operations to other locations to source talent, refrain from scaling up operations in Haryana, or operate remotely in response to the survey.
After having a shortage of local talent and people with the necessary qualifications, the legislation would significantly restrict their ability to recruit deserving people, affecting diversity and inclusion at the firms. Some businesses emphasised that recruiting should be based on ability criteria, regardless of the applicants’ location.
According to a previous Nasscom survey, nearly 80% of IT and IT-enabled services firms said the law would have a “negative effect” on their future business operations and investment plans.
According to the study, the transition will affect nearly 150,000 current IT-ITeS employees. According to the study, given the industry’s high attrition rate, it could have a “serious” effect in the next 1-2 years.