This seemingly insane question is fraught with great implications for the six million workers in the IT industry in terms of access to labor rights. It is therefore an issue that deserves the attention and consideration of all concerned. So far, information technology companies have publicly asserted that employees in the industry are highly qualified and highly paid personnel and, therefore, are not covered by labor laws, especially the law. on labor disputes which provides a legal mechanism to resolve disputes concerning conditions of employment, non-employment and service of workers.

The IT service industry in India, despite all the lofty claims to push the boundaries of technology, is unfortunately still stuck in the primitive model of wage arbitration. The foundation of Indian IT services is the large pay gap between the salary of an Indian white collar worker and that of a similar worker in Western countries. There is a direct correlation between revenue growth and the addition of manpower in the outsourcing industry.

In addition, IT services in India is a labor intensive industry, with labor costs accounting for over 50% of revenues, with very little capital investment. It’s a pretty crass and constant conflict between employee wages and corporate profit margins. The average work experience of IT employees has remained constant at around five years despite rapid growth in revenue and workforce. Less experienced employees receive lower salaries and thus help maintain the abnormally high profit margins (around 18-25%) of IT services companies.

In times of a global demand crisis, it makes perfect sense for companies to lay off the most experienced and “expensive” worker in order to maintain their super profit margins. It is under these circumstances that terms like “involuntary attrition” are widely used to dismiss thousands of workers, and companies have long argued that these employees are not “workers” within the meaning of labor disputes law. .

Double talk exposed

However, a recent decision of the Bench Division of the High Court of Karnataka in the Commissioner of Income Tax against Texas Instruments India Pvt Ltd (ITA No. 141 of 2020 c / w ITA No. 151 of 2020), issued in April of this year, at this “The software engineer in himself would be a worker; a software engineer doing supervisory work would not be a worker.

This is a welcome verdict for the millions of workers engaged in the computer service industry. The irony behind the verdict is a story worth telling. The above dispute between an information technology company and the income tax service concerned the issue of a tax relief requested by the company under section 80JJ-AA of the Law on income tax, in which companies request income tax relief of up to 30% of emoluments. paid to newly hired workers.

The problem in finding such a concession is the fact that newly recruited workers must meet the definition of “workers” under section 2 (s) of the Labor Disputes Act. A number of large IT companies have called for tax breaks for the same reasons. Thus, we are witnessing a grotesque situation in which, on the one hand, IT companies gleefully and opportunistically demand concessions from the Income Tax Department for creating new “labor” jobs, and on the other hand, they are busy denying the labor rights of the same “workers” at their workplace, claiming that they do not fall under the definition of “worker” under the Labor Disputes Act. !


The verdict unambiguously grants the status of “worker” to software engineers who have no supervisory function. The statute comes with several rights in the workplace, including the right to freedom of association and the right of access to the dispute resolution mechanism provided for in the Labor Disputes Act. The industry is known for its long working hours and constantly changing work schedules. Workers in industry are entitled to overtime payment at the rate of double the usual wage rate under the provisions of the Stores and Business Establishments Act.

Most importantly, the IT industry’s assertion in these dispute resolution forums, including the Department of Labor and labor tribunals, that employees are not workers must be definitively dismissed in light of the recent verdict. Thousands of workers made redundant with no chance to be heard and the victims of “involuntary attrition” have been frustrated for too long by the hypocrisy of this argument in their quest for justice.

The regular industry practice of laying off thousands of people during a demand crisis is only aimed at reducing the cost of labor to increase or maintain their large profit margins. Stories of underperformance are only belated excuses for such practices. The principles of natural justice are violated with impunity in the case of disciplinary measures against employees. It is imperative that some corrective action be taken to regulate the flawed and unfair employment practices of the computer industry. One such measure would be to extend the application of the Industrial Employment Act (Permanent Regulations) to the computer industry. This verdict delivered by the Karnataka High Court offers significant relief and a glimmer of hope for workers in the industry.

(Sathyanand is secretary, All India Trade Union Congress, Bengaluru; Muralidhara is a labor rights advocate)

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