Explained: Why firms are not happy with Haryana’s local job reservation law

20 Mar 2021

The New Haryana State Employment of Local Candidates Act, 2020 proposes to reserve at least 75 per cent of jobs in the private sector for locals, with a monthly remuneration of up to Rs 50,000. But a large number of companies are not happy with the local job law. Here's why:

The recent local job quota law passed by the Haryana government may do more harm than good, especially in Gurugram, which has emerged as one of the biggest startup hubs in the country over the past few years.

The New Haryana State Employment of Local Candidates Act, 2020 proposes to reserve at least 75 per cent of jobs in the private sector for locals, with a monthly remuneration of up to Rs 50,000. The quota will be applicable for a period of 10 years after it is notified by the government.

All you need to know about the law

All companies, societies, trusts, LLP firms, partnership firms and any person employing 10 or more persons will be required to follow the state government’s job quota law. Simply put, private firms in the state will be required to follow the new rule.

As far as the candidates are concerned, a person who is domiciled in the state of Haryana will be eligible to get the benefit of job reservation under the law. The person, however, needs to register on a designated portal for being eligible for a job under the law.

The employer will be required to hire people through this portal. It may be noted that any private company that does not follow the provisions of the law can be fined a minimum of Rs 10,000 to a maximum of Rs 2 lakh.

If the employer does not follow the law even after the initial fine, a penalty of Rs 1,000 per day shall be imposed till the violation continues. Companies will face a bigger fine or penalty if they produce false records of employment.

Why firms are unhappy

The development has unnerved many startups located in Gurugram and they may consider relocating operations to other states, according to a recent survey conducted by Nasscom. Staffing firms such as Quess and Xpheno have also indicated the same.

Not just new-age startups but Information Technology firms, auto and export companies based in Gurugram have called the new local job quota regressive. Many industrialists based in the state have also questioned the legality of the quota.

According to a Hindustan Times report, several industrialists are exploring options to challenge the government’s job quota law in court.

It may be noted that more than 300 Fortune 500 companies are headquartered in Gurugram. Most of these companies have set up a base in the city over the last two decades. Not just IT and ITeS firms but a large number of auto and ancillary companies have a presence in the state.

As many as 73 companies who participated in a Nasscom survey said they are worried about the impact of the law. The survey also indicated that it will impact 1.5 lakh jobs in the state.

"Extrapolating to 4 lakh IT-ITES employees, the act will impact about 1.5 lakh current jobs (37 per cent of all the IT-ITeS jobs). Given that the act applies to new hires, the impact is expected to be severe in 1-2 years as the industry sees a high attrition rate," the survey said.

Industry bosses said that most states in India are now welcoming companies to invest and this job reservation law may hurt Gurugram.

Ashish Aggarwal, Senior Director and Head Policy Advocacy at Nasscom said, "This move undermines a slew of reforms seen over the last year that enabled remote working, facilitated ease of doing business and encouraged startups.”

What companies want

Most companies have slammed the new local job quota law and asked the government to focus on training and skilling local youth.

Several top executives of Gurugram-based companies said they are worried that the current scope of job reservations may be expanded later. They agree in unison that the best way to provide jobs to the youth of the state is by equipping them with skills and give them proper training.

Several experts have explained that Haryana is facing immense competition from other states that have now started attracting industrial investment. Those states, however, are offering liberal policies and employment-incentive schemes. The new local job law could severely reduce new investments in Haryana.

Chandrajit Banerjee, Director General of CII, said the Haryana government could have avoided imposing such restrictions at the moment.

“Reservation affects productivity and industry competitiveness. We hope the state government of Haryana re-looks at the legislation. With Prime Minister’s vision of ‘Ek Bharat, Shrestha Bharat’ we look forward to an integrated and mobile labour market within the country,” Banerjee added.