A surge in outsourcing to India, anticipated in the wake of a sharp rise in H1B visa fees imposed by the Trump administration, could be dampened if a proposed Hire Act from a Republican legislator is enacted in its present form.
The Halting International Relocation of Employment (HIRE) Act has been introduced in the US Senate this month by Senator Bernie Moreno of Ohio.
The bill proposes a 25 per cent tax on payments made to foreign firms for services that benefit US consumers, and would also disallow tax deductions for those payments.
The bill also proposes that the tax revenue generated be used to create a Domestic Workforce Fund, financing training and apprenticeships for American workers. If passed, the measures would take effect for payments made after December 31, 2025.
Analysts at global workforce and human resources solution firms caution that the proposed legislation could raise offshoring costs by 45–60 per cent, forcing IT and BPO firms to rethink strategies for servicing US clients.
American companies reliant on large-scale, routine functions such as application maintenance and business process outsourcing may be compelled to pause, renegotiate, or scale back contracts if the HIRE Act goes through.
“For Indian IT firms, this isn’t merely a short-term regulatory challenge, it signals a potential shift in the global outsourcing pattern. For decades, India’s IT success has been anchored in the cost advantage of labour arbitrage.
“The implementation of this Act could raise offshoring costs by an estimated 45–60 per cent, effectively eroding the pricing edge that has long been India’s competitive strength,” said Sanketh Chengappa, director and business head-professional staffing, Adecco India.
According to estimates by Nasscom, India’s total IT industry revenue was $282.6 billion in FY25. Of this, export revenue was $224.4 billion.
“With over 60 per cent of India’s IT exports tied to US clients, this could lead to immediate pressure on margins. Even captive centres may start rethinking their delivery models, potentially shifting more work onshore, nearshore, or investing in automation to manage rising costs,” Chengappa said.
BPO worry
The Indian BPO industry is estimated to employ over 4 million people and attrition could rise in the short-run if the Act comes into effect.
“Today most American companies partnering with the Indian IT services industry are doing so not just for lower costs, but also because of the large talent pool that brings high value to these companies.
“In the short run, yes there will be an impact on the overall headcount of the IT sector, but in the long run, the additional costs would need a rethink on the model that companies work on. If not, the impact will be lower headcount growth and higher attrition,” said Neeti Sharma, CEO, TeamLease Digital.
“The HIRE Act’s ripple effects would inevitably touch the Indian workforce and the talent equation will get disturbed.
“With fewer US projects in the pipeline, the risks include slower hiring, contractual uncertainty, and possible job cuts at the entry level. This could have increased attrition as employees look for stability elsewhere,” Chengappa said.
Analysts have said that Indian BPO companies have to look at markets beyond the US for the long run growth of the sector.
“Indian companies will need to ensure diversification of location away from the US and focus on other countries in Europe and Asia Pacific most notably UK, Germany, Japan and Australia,” said Roop Kaistha, regional managing director — APAC, AMS.
“There is an urgent need to rethink how work is delivered between India and the US. This is the time to accelerate transformation and shift toward technology-led, consulting-driven models. Companies should focus more on cloud, AI, cybersecurity, and other areas where expertise matters more than cost. Moving away from manpower-heavy models to automation and digital delivery will be key,” Chengappa said.