Changes in Canada law to put Indian IT cos including TCS, Infosys, Wipro, under scanner

Written by Debojyoti Ghosh | Debojyoti Ghosh | P P Thimmaya | Bangalore | Updated: Jan 29 2014, 15:14pm hrs
CanadaAlmost all the leading Indian IT majors, including the likes of TCS, Infosys, Wipro and HCL, among others, have stationed themselves in Canada.
The protectionist stance sweeping through highly developed economies like US and UK with focus on saving local jobs has now seeped into Canada, which has ushered in substantive amendments to the rules governing the employment of temporary foreign workers.

This will make a large number of Indian IT companies operating in Canada to come under stringent scrutiny of their hiring processes and ensure there is no discrimination in salaries paid to locals and overseas hires. Almost all the leading Indian IT majors, including the likes of Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies, among others, have stationed themselves in Canada.

The new amendments, which have come into effect from December 31, 2013, under Canadas Immigration and Refugee Protection Regulations will impose greater compliance obligation on Canadian employers participating in the temporary foreign worker programme (TFWP) and also provide immigration officials with extensive authority to investigate and penalise companies where they are found to be non-compliant.

Talking to FE, Howard Greenberg, partner, global immigration leader, KPMG Canada, said that the prime objective of the new regulations is to see that Canadian jobs are preserved and create strict controls with higher level of accountability. There is a perception in Canada that companies have taken advantage of TFWP to bring in large number of foreign workers at lower pay, the KPMG official said.

The new regulations states: Employers must provide a temporary foreign worker with employment in the same occupation as that set out in offer of employment and with wages and working conditions that are substantially the same as but not less favourable than those in the offer. This would result in periodic checks on the wages paid by companies to their foreign workers to ensure that there is no disparity. Similarly, employers should also maintain the record of the foreign workers from the time of employment for a period of six years as against the earlier norm of two years.

Ever since the global financial crisis of 2007-08 and the resultant economic downturn, Indian software-services companies have been generally perceived in US or Europe as firms which take away local jobs or use resources from India at lower salary.

The new Canadian regulations also emphasises that during hiring, companies should exhaust all options of employing locals before turning towards foreign workers.

Sanjoy Sen, senior director, Deloitte Touche Tohmatsu India, felt that these new regulations will only increase the audit fatigue of the Indian IT companies. The entire objective of these amendments is to allay the fears of the local economy while it substantially increases the power of the government to inspect, scrutinise and impose fines.

Sen does not expect the top-tier Indian IT firms like TCS, Infosys, Wipro or HCL Technologies to be deeply affected by these new amendments as they are fairly global in their operations and invest significantly in adhering to compliance and regulatory requirements.

To combat this perception and gain greater access in the market they operate, over the last two years, blue-chip Indian IT companies have increased the momentum of local hiring in its largest market, the US, driven by the need to be closer to its customers and to offset any impact from the proposed Immigration Reform Bill. Last year, Infosys said that it has been adding 500 people every quarter and 2,000 a year in the US and plans to keep the number steady.

Wipro has embarked on a globalisation initiative to groom a new set of leaders overseas. Under its Gateway of India programme, the Bangalore-based IT firm is making its foreign hires in the US, Europe and South Africa undergo a stint in India with an aim of expanding its global talent pool.

It has also been involved with other initiatives to get connected with the local communities in foreign countries where they have their presence.

For Indias largest IT-services exporter TCS, Latin America is the largest market from an overseas freshers hiring point of view. The Mumbai-based IT major has visited 30 institutes for campus hiring in the US last year.

Greenberg said that the old business model of high volume of temporary foreign workers is not going to work in the new system, adding that the new rules allows foreign workers to transition into Canadian citizens faster than other countries which would prove beneficial to everybody. He felt that Indian IT companies will have to develop new priorities like transition of some of the workforce as permanent citizens, develop training programmes for Canadians or open development centres. The costs (to be borne by Indian firms) will be higher but the workforce will remain steady and predictable, noted Greenberg.