India-UK FTA: Indian IT's Operations Cost To Reduce With Employee Mobility Easing

The India-UK Free Trade Agreement is set to benefit the Indian IT services sector by easing worker mobility, allowing companies to deploy talent more efficiently in the UK. This will reduce operational costs and improve competitiveness in the market.

With the agreement, India stands to benefit in services such as IT/ITeS, financial services, professional services, other business services and educational services. The deal eases mobility for Indian professionals including contractual service suppliers, business visitors, investors, intra-corporate transferees and their families and independent professionals.

"The ease in mobility of IT workers will enable IT companies to send more employees to client destinations easily. As deploying talent will be much more cost-effective now, the cost of operations will reduce," said Pareekh Jain, chief executive officer of Pareekh Consulting.

Further, the Double Contribution Convention in FTA will help Indian IT professionals on short assignments to avoid social security contribution, which is up to 20% of the salary of the professionals. The reliance on subcontractors to deploy employees in the UK will reduce, bringing the costs down, as hiring subcontractors is costlier than deploying internal employees.

The Double Contribution Convention exempts Indian workers temporarily employed in the UK and their employers from paying social security contributions for a period of three years.

"By eliminating this double contribution burden, the agreement directly addresses a long-standing challenge faced by Indian Technology companies and other service providers operating in the UK," technology industry body Nasscom said in a statement. "This exemption will not only enhance the access of Indian talent in the UK but also create new opportunities for skilled professionals, enabling them to contribute to the UK's economy."

The FTA's focus on digitally delivered services, professional services and financial services aligns perfectly with the aspirations of the Indian technology sector. It opens up avenues for deeper collaboration in emerging areas, such as artificial intelligence, cybersecurity and digital transformation, while also creating a conducive environment for startups and innovators, Nasscom added.

After the US, Europe is the biggest market for Indian IT companies, with a major chunk of revenue contribution coming from the region. TCS derives 31% of its revenue from Europe, 16.8% from UK specifically, Infosys derives 31.2% from Europe, Wipro derives 27.1% from Europe and HCL Tech 29.2% of its revenues from Europe.

With increased employee mobility, the Indian IT companies will be able to compete better in the UK market, even sign smaller deals, as they will have better employee presence in the region, according to Jain.