US HIRE Bill: Since India has long been a hub for IT outsourcing and related services, the bill has raised concerns in the Indian IT industry, which is heavily dependent on US clients for revenue.
The US has introduced a new legislation, which is expected to have a significant impact on the USD 250 billion Indian IT industry. The Halting International Relocation of Employment (HIRE) Bill was introduced in the US Senate earlier this month by Ohio Republican Senator Bernie Moreno. The proposed law imposes heavy fines on companies in the United States that outsource jobs abroad. The move aims to encourage companies to hire locally and reduce their dependence on foreign workers.
India’s $250 billion outsourcing industry
Since India has long been a hub for IT outsourcing and related services, the bill has raised concerns in the Indian IT industry, which is heavily dependent on US clients for revenue. The bill has been introduced at a time when US-India trade relations are already under strain due to US President Donald Trump’s additional tariffs.
What Is HIRE Bill?
The HIRE Bill has three key provisions designed to discourage the outsourcing of work overseas.
- 25 per cent outsourcing tax: The bill proposes a 25 per cent tax on outsourcing payments, defined as the amount paid by a US company or taxpayer to a foreign company or individual whose services ultimately benefit consumers in the US.
- Restrictions on tax deductions: It would also prevent companies from deducting outsourcing expenses from their taxable income, increasing the financial burden of sending work overseas.
- Domestic Workforce Fund: Revenue from the outsourcing tax would be directed into a newly formed Domestic Workforce Fund.
How will it impact Indian companies?
India has been the biggest beneficiary of outsourcing in the last three decades. According to industry estimates, major Indian IT companies – Tata Consultancy Services (TCS), Infosys, Wipro, HCL Tech and Tech Mahindra – derive 50 to 65 per cent of their total revenue from North American clients. These companies provide a variety of services, including software development, system integration, cloud management and business process outsourcing (BPO). These companies also offer services to many Fortune 500 companies such as Citigroup, JPMorgan Chase, Bank of America, Pfizer, Microsoft and Saint-Gobain.
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