Why Tamil Nadu's decision to allow unions in IT companies is a bad move

The Indian IT-BPM industry is one of the largest employment creators in the country employing more than 3.7 million with revenues of more than $140 bn. Apart from direct employment, the industry also creates indirect employment of close to 2X to 3X creating a set of high income earners who contributes substantially to the economic growth of the country.

The leading industry players work with global giants in building their core systems and make them competitive in the global market place. This industry attracts the best talent, hires on a large scale; pay them the best salaries while managing greater attrition due to shortage of skill sets. Generally, governments in India understood the benefit this industry brings to the table and have rightly so supported the industry by all ways and means.

 

But some of the recent events have changed the context to some extent. The industry’s growth rates have come down to high single digits and there were certain involuntary separation in certain companies. The overall hiring too had come down for the industry in line with revised growth rates. There were also some recent issues on income disparity between the top management and the average employees. All these could have led to the noise again of creating an employees union for the Industry.

Most of the states have exempted IT industry from the Industrial Disputes Act, 1947. IT industry has to work 24x7 for global clients and were treated as essential services which cannot afford any disruption. But, the recent decision by the State of Tamil Nadu of including IT industry under the Industrial Disputes Act is of great concern to the industry.

The idea of forming an employees union was tried earlier too but failed miserably. The reasons are multiple. One it is a global industry which hired best talent purely on merit. Second, the employees are highly skilled and hence always carried a market value which reflected in greater attrition in the industry. Third, these are white collared workers who are very averse to joining a formal union to assert their rights. They were always pampered and were paid the best in the country with all attendant benefits. 

More than all of these, the idea of formal employees union giving more bargaining power to employees is an outdated idea in the current times where we are in. I do not think the decision of the Tamil Nadu government is going to drastically change the way the industry was working all along. I am also not seeing any evidence to say that the employees will jump into this opportunity to form a union tomorrow to assert their rights.

I sincerely feel that Tamil Nadu government should reconsider its position on this issue and revert to status quo. As a country, today we are struggling with the biggest issue of employment generation. There are very few industries which can create jobs at a scale. We should not kill the golden goose to achieve certain short term political points. One of the reasons the industry flourished was because the government never really understood and interfered in the industry. I think it is in the government’s interest to leave the industry alone for it to prosper.

One consequence of this would be that the industry will be sceptical on expanding further in Tamil Nadu. It is not a good sign for the new government which had just taken over with the key plank of creating greater investments and jobs. I hope good sense prevails. 

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V Balakrishnan is former CFO of Infosys

@balakv1970