Survey on the impact of new Haryana State Reservation Law on start-ups: March 2021

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Survey on the impact of new Haryana State Reservation Law on start-ups: March 2021

Garima Prakash

@GarimaP

March 26, 2021

Public Policy

NASSCOM recently conducted a survey to assess the impact on start-ups of the new Haryana State Employment of Local Candidates Act, 2020. The law forces companies to recruit at least 75% of all new employees to have a domicile in the State if the salary for the job is up to Rs. 50000 per month. The State Government is planning to enforce this law with effect from 1 May 2021, i.e., labour day. Earlier, NASSCOM had conducted a similar survey or impact of this job reservation law on the IT-ITeS companies in Haryana (results here).

A total of 50 start-ups participated in the start-up survey, from various industry segments including deep-tech, edu-tech, fin-tech, health-tech, e-commerce etc. Overall, these start-ups employ almost 900 employees in India, out of which 43.7% are in Haryana.

Some of the key findings are:

Start-ups are concerned that this will increase the burden of compliance on them, thus slowing down the company’s overall operations. It is already difficult for start-ups to hire people as they cannot compete with big companies on benefits etc., and with the reservation in place, the time and cost of finding talent will increase, thus impacting the business negatively.
On average, 67.3% of the employees in start-ups in Haryana are earning below Rs. 50000 per month. This means that more than half of the future-employees in a start-up in Haryana will be impacted by this law, in any future recruitment done by the company.
60% of the companies have clearly stated that this will negatively impact their future investment plans in Haryana in the short or long term. Many of them expressed that this would result in shifting/growing their operations to other States which do not have such local reservation laws. Out of the remaining, a majority have mentioned that they are not yet in a position to articulate how this will impact them.
According to start-ups, the skills that they look for in a potential employee may not be adequately found in local candidates. These include, software development experience and skills, AI and machine learning skills, analytical and logical reasoning aptitude, communication skills – written and spoken, marketing skills – digital and non-digital, programming skills, etc.

The detailed survey findings are attached. Please reach out to garima@nasscom.in, for queries relating to the survey.

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