This comes after the country’s largest IT services firm Tata Consultancy Services found senior executives breaching corporate code of conduct to give preferential treatment to some recruiters. The incident was discovered following a whistle-blower complaint. Initial reports suggested that TCS had blacklisted three staffing firms identified during an investigation.
“On receipt of the complaint, the company launched a review to examine the allegations in the complaint. Based on the review: this does not involve any fraud by or against the company and no financial impact,” TCS said in a statement on Friday. It also said that no key managerial person of the company has been found to be involved.
Experts suggested that the number of firms under scrutiny could be higher, as the investigation is currently ongoing. The incident may also spark a greater scrutiny of hiring processes within other IT firms that hire in large numbers.
ETtech“The current findings are just the tip of the iceberg; enterprises with significant staffing spend are vulnerable to unwelcome nexuses in staffing procurement. Working with unscrupulous IT staffing firms based on conflicting relationships is rampant in the industry,” said Kamal Karanth, co-founder of specialist staffing firm Xpheno.
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“Some US-based MNCs send in ombudsmen for governance checks and refresh their staffing partner ecosystem every 3-4 years. They also deploy new procurement processes and checkpoints based on previous findings. They send independent firms for audits and deep dives into commercial practices and data trails. However, these practices are rare and infrequent,” Karanth added.
Experts also said that cases of bribery for recruitment could have gone up during 2021-22, just like moonlighting, when tech talent witnessed accelerated demand and attrition rates hit record highs. During fiscal 2022, top four Indian IT service firms – TCS, Infosys, Wipro and HCLTech – hired more than 220,000 people between them. A significant part of this number hired straight from campuses and staffing firms have no role to play in that recruitment.
At present, though, after almost two years of aggressive hiring, tech companies are seeking to slow down, and utilise their existing talent effectively before hiring more amid a global slowdown. The $245 billion Indian technology industry employs over 4.5 million people.
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“The impact of this case will warrant other IT companies scrutinise their own hiring strategies in recent times who have rushed to meet talent requirements without a fair assessment of how that is being achieved,” a HR industry executive quoted earlier said. Technology analysts also said that incidents such as these are not good for firms bidding for projects, as it not only raises concerns about their conduct but also on the quality of talent.
“In IT staffing requirements, companies can work with multiple players, many of whom are not very highly regulated,” said the head of a reputed staffing firm who wished not to be identified. “If a company like TCS engages with a hundred providers, there are some who know that if they create undue influence, the CVs they put up will travel faster within the system.”
Some of these small staffing companies make $1-2 million a year from IT firms, the person said. “There’s huge profitability, which is why they are tempted to give some unscrupulous company officials a cut to get the business.”
Experts say a top IT firm will have around 80-120 subcontractors, each specialising in a particular geography or a domain like cybersecurity or analytics.
Signs of a larger rot?
Some experts hinted that corruption in hiring is not limited to TCS or a few firms.
“Many MNCs ask for money,” said the chief executive of a staffing firm who was asked to pay over Rs 10 lakh to be onboarded by a procurement official of a leading MNC. “I was told I could earn it back in a few months.”
In a media statement, Indian Staffing Federation (ISF) urged all stakeholders, including corporates and the government, to consider engaging staffing companies that prioritise ethical employment practices and regulatory compliance. Industry labour unions have also called for further investigation into the TCS issue.
Navnit Singh, chairman and regional MD of executive search firm Korn Ferry India, however, thinks the case of TCS was an aberration.
While cases of bribery in exchange for recruitment was something that was prevalent around 15-20 years ago when the call-centre industry took off, most companies have since placed guardrails to ensure that a strict code of conduct is followed for recruitment tenders, he said.
“Large companies follow a strict procurement policy for empanelment of staffing consultants,” Singh said. “Pricing for such deals are carefully negotiated and documented. Corruption at a large scale within this framework is not common in the industry. It is certainly an aberration.”
TCS has reportedly sacked four executives related to this incident. TCS, has denied any fraud or financial impact in a statement to the stock exchanges.
The company has added more than 160,000 employees over the past three years and has recently seen a change of guard with K Krithivasan taking over as the CEO.
“It is surprising that the company took this long to investigate the matter given the large intake that it has on a regular basis and should be performing such checks regularly,” another HR executive said, adding that some of these “arrangements for hiring” exist across a lot of companies that recruit in large numbers. “This allows the third-party staffing companies to guarantee a placement and boost their numbers.”
The HR industry executive quoted earlier said TCS has multiple staffing vendors and it is possible that a few smaller vendors bypassed processes. In which case, the financial benefits received could be much lower than the estimated Rs 100 crore figure.
It is time for NASSCOM or heads of IT firms to bring strict guidelines for governance, due diligence, and self-regulatory checklists to prevent these practices. Like audit firms are changed every five years, large staffing relationships also need similar changes to avoid conflicting alliances, Karanth of Xpheno added.
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