Infosys is Accused of Abusing Non-Competes as Competition for Talent Intensifies

India’s IT services giant Infosys has been accused of barring its employees from joining rival firms amid the rising rate of attrition in the country’s technology market.

A non-profit called Nascent Information Technology Employees Senate (NITES) filed a complaint with the country’s Labour Ministry, alleging that the IT services giant subjected its staff to a non-compete clause.

Under this clause, an Infosys employee cannot work for the same customer he worked with at Infosys during the 12 months period prior to leaving the company.

While Infosys has admitted that attrition is high in the IT services industry, it dismissed the allegation that it is preventing its employees from joining rival organizations.

In an email reply to Nearshore Americas, Infosys said the non-compete clause is “standard business practice in many parts of the world”, adding that such a rule is needed to “protect the confidentiality of the information and customer connection.”

There is nothing secretive about it, according to the IT firm. “These are fully disclosed to all job aspirants before they decide to join Infosys,” it said. Moreover, the non-compete clause has been around for many years.

Nearshore Americas asked NITES president Harpreet Singh Saluja if he knew any former Infosys employee prevented from joining other organizations. He did not disclose any name but insisted that the non-compete clause be removed immediately.

“Many former employees of Infosys are in touch with us. They fear it might blacklist them on charges of violating the clause,” Saluja added.  He went on to say that the non-compete clause violates section 27 of India’s Contract Act.

So far, no former employee of Infosys has been dismissed or blacklisted for flouting the clause. However, Saluja says many employees are keeping a low profile and not raising their voices for fear of losing their job.

Thanks to the red-hot demand for talent, IT companies are either “unwilling” or “cannot afford” to lose a single worker over the charges of violating the non-compete clause in another company, said most of the industry analysts NSAM spoke with.

Attrition and India’s IT Industry

All major IT firms in India have been plagued by staff exodus. Infosys has reported an annualized attrition rate of over 27%. Cognizant, which has more than 200,000 employees in India, clocked an attrition rate of 33% in the third quarter of 2021.

Most of those who left Infosys in the past 12 months joined Accenture, Cognizant, TCS and Deloitte, reported the country’s business daily Mint, citing data from staffing company Xpheno.

Infosys says it is offering “learning and reskilling” opportunities to its employees in an attempt to boost its tech talent pool.

Rising attrition is stoking wage inflation, forcing service providers to raise salaries by more than 40%.

“Talent shortage and the sudden surge in demand for digital transformation services are the key reasons behind the attrition,” said Sunil C., a senior executive at Teamlease, a staffing services provider.

It is very much clear that a “talent war” is underway in the IT sector, with captives and startup unicorns offering exorbitant salaries to attract the best talent in large IT companies. For captives, IT companies such as Infosys have become a “poaching ground”, Sunil told Nearshore Americas.

India is home to more than 100 startup unicorns, with around 45 of them reaching that status in 2021 alone. Another 13 startups became unicorns in the first quarter of this year.

“Many startups are flush with cash and they offer a better pay,” Sunil said.