Battling high attrition rates, Infosys Ltd, which is India's second-biggest IT services exporter, has been accused of "unfair practices" against its employees by invoking a non-compete clause to stop the exodus to rival firms. This has come to light after Nascent Information Technology Employees Senate (NITES), a Pune-based association of IT and BPO sector employees, alleged that the Bengaluru-based IT major has indulged in "illegal" practices by invoking a clause in the employee contract, which will stop them from moving to some of its rival companies.
In a letter written to the labour and employment ministry and corporate affairs ministry, NITES said the restraint being put on employees is "unduly harsh and oppressive". The body has also sought necessary orders to be issued against Infosys for removing such an "illegal, unethical and arbitrary" clause from the employment letter.
Infosys, on its part, has termed it a "standard business practice", which is not new and is crucial to protect the confidentiality of business interests.
The contentious clause in the employment agreement, accessed by Fortune India, says that for six months after termination of the contract, one will not accept any “offer of employment from any customer”, where he or she worked in a professional capacity in the past 12 months immediately preceding the termination of the service with Infosys.
It also states that an employee will not accept any offer of employment from a ‘named competitor’ of Infosys. If one’s employment with such a company would involve him or her having to work with a “customer with whom I had worked in the 12 months immediately preceding the termination of my employment with Infosys”. The ‘named competitors’ cited in the appointment letter are TCS, Accenture, IBM, Cognizant Tech, and Wipro.
TCS reported a huge rise in the attrition rate at 17.4% for FY22, while the attrition rate at Infosys touched a whole new level of 27.7%.
The NITES letter to the Centre says the restrictions in the employment letter is "clearly in restraint of trade and therefore illegal under section 27 of the Contract Act".
Harpreet Singh Saluja, president of Pune-based IT employees union NITES, told Fortune India the reason that the attrition rate is quite high is because there's a huge demand in the job market.
"The invoking of the non-compete clause will deprive many talented individuals of joining some of the top rival companies. The clause hampers a person's freedom to choose whichever organisation or field one wants to work, and its violation of the Contract Act," he said. He added the clause cited by the company is not new but the issue was highlighted only recently when the company began enforcing it and several employees complained regarding the issue. He added that other rival IT companies could also come up with similar measures against employees after Infosys.
Almost all top IT companies are struggling to retain talent in the wake of huge demand, causing the attrition rate to surge to record levels. This is one area that remains a pain point for all tech services giants.
Apart from Infosys, TCS, which released its quarterly results this month, has also flagged the issue of high attrition. All top IT services firms are fighting for a limited pool of talent in the Indian tech industry, which has caused a huge spike in the attrition rate in the past three quarters. The companies believe the attrition rate is only going to get worse in this financial year despite several initiatives taken to retain employees.
