One of the key factors that has helped maintain service delivery levels in India – even during the peak of the COVID-19 lockdown – has been the government’s temporary relaxation of various legal, regulatory, and compliance frameworks to allow remote delivery via a Work From Home (WFH) model. In an effort to continue to increase the ease of doing business, especially with a remote workforce model, India’s Department of Telecom (DoT) has issued new guidelines for the IT-business process (BP) industry.
These guidelines should significantly reduce obstacles for companies adopting a WFH delivery model. In the post-COVID-19 era, scaled WFH adoption will be inevitable for IT-BP organizations as we highlighted in our previous blog. In our conversations with industry stakeholders, organizations have called out uncertainties around long-term legal and regulatory support to WFH as a key challenge to sustainable and scaled adoption. The new guidelines can be the steppingstone to assuaging some key business concerns, making these organizations truly bullish on WFH adoption.
The new guidelines allow IT-BP companies in India to use a “Work From Home (WFH) facility” to deliver global services as an “International OSP” (other service providers) for a period of three years (with provisions for further extensions). Provisions within the new guidelines that will make it easier for companies to adopt the WFH model include:
- Freedom to set up remote centers anywhere in India: This allowance supersedes various local restrictions and empowers companies to hire and operationalize employees independent of their current/future location
- Clearer legal status for WFH employees: This provision treats WFH roles as extended / remote agent positions with rights and responsibilities better demarcated than before, effectively treating employees’ home offices as extensions of the organization’s office, easing regulatory and security hurdles to access data outside office premises
- Relaxed registration and financial requirements: Eased restrictions include the removal of the lengthy registration process and a bank guarantee to set up a facility
- Reduced reporting burden: The new guidelines offer more streamlined and less stringent regulatory and compliance reporting obligations for organizations
- Relaxed tech and infrastructure requirements: These changes include the relaxation of technology and connectivity infrastructure requirements to enable WFH, as well as the easing of the requirement on static IPs and pre-defined locations-based networks
The intention behind the changes is to remove the unnecessary bureaucratic restrictions that were preventing organizations from exploring the full potential of WFH. Beyond some of these relaxations, there are provisions to retain security-related obligations to protect against unlawful content and usage, for example, empowering organizations to set up their own security mechanisms. These guidelines balance the key trade-off that organizations need to contemplate when they consider integrating WFH in the delivery model: the feasibility/ease of remote delivery versus the additional risk assumed when moving work from the office to employees’ homes. We expect these changes to be a win-win-win situation for IT-BP organizations, employees, and the overall India delivery market.
For IT-BP organizations, beyond reducing the compliance burden, these guidelines will:
- Expand their access within the talent market, as they can hire the best-fit talent regardless of location
- Increase access to new talent pools; for example, they can hire talent from tier-2 cities without setting up new physical offices (pre-COVID-19, 75-85% of IT-BP employees worked out of tier-1 locations, with a vast majority of them having migrated from non-tier-1 locations)
- Drive a next wave of cost optimization. Refer to our playbook for details on the business case of WFH adoption
For remote employees, these guidelines will strengthen their rights, lay the foundation for the legal status of WFH in India’s labor laws, and ease concerns relating to health and safety in the workplace.
With various countries still struggling to ease remote delivery, we expect India’s overall competitiveness to improve (especially for organizations that are bullish on the WFH model), push growth and job creation in non-tier 1 location, and improve the overall ease of doing business.
All of this is likely to result in greater efficiency in the service delivery model by removing restrictions that allow a desirable level of WFH model adoption. A recent Everest Group survey found that adoption of WFH (complete WFH or hybrid) within India based IT-BP players will be significantly higher (65-75% FTE equivalent) than pre-COVID (less than 10% FTE equivalent), but lower than the adoption rate at the peak of the COVID-19 lockdown (80-90% FTE equivalent).
These are all welcome changes. However, it is important to understand the limits of these guidelines in pushing sustainable and scalable WFH adoption. Beyond the domain of the DoT, there are various other regulatory and compliance bodies that need to make similar forward-looking policies. For instance, there are still uncertainties related to:
- Labor laws for WFH employees: WFH-specific regulations within India’s labor laws still do not give official status to WFH, creating uncertainties around various employee benefits and rights
- Tax regulations: Tax incentives and deductions for employers/employees remain unclear
- Free trade zone-related regulations: Most of India’s IT-BP organizations are based in Special
Economic Zones or software technology parks. There is still no long-term view on temporary relaxation on import duty and mobility across these zones
We continue to track this market and expect many of these uncertainties to clear up soon. Be sure to look for updates from us soon.
If you have any questions or comments on the WFH model, reach out to Akshay Pandita.