The person said “while the investigation is still ongoing and the final report is still awaited”, initial reading suggests that subcontractors are a very small percentage of the overall workforce of TCS and the claims are “ridiculously exaggerated”.
“This is not an issue related to hiring of employees of TCS, but with the contractors of TCS, there are claims that the amount involved is Rs 100 crore, it is not even remotely close to it,” said the board member speaking off the record. “The company has written to all the directors and told them what is happening,” the person said.
Meanwhile, TCS is consulting with external auditors to investigate the matter, said another person. The company did not respond to queries about the letter to the board and the external auditors at press time.
TCS was alerted about senior executives breaching corporate code of conduct to give preferential treatment to some recruiters at the company’s RMG (Resource Management Group) division. The incident was discovered following a whistle-blower complaint towards the end of April or the first week of May and the investigation is nearly complete, said another official aware of the development.
TCS said in a statement on Friday: “On receipt of the complaint, the company launched a review to examine the allegations in the complaint.” Based on the review, TCS found that “this does not involve any fraud by or against the company and (has) no financial impact”. It also said no key managerial person of the company has been found to be involved.
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“The issue relates to breach of the company’s code of conduct by certain employees and vendors providing contractors,” it said.RMG is responsible for allocation of available resources to various projects and in case of any shortfall, fill such requirements through contractors, TCS said in its statement. Contractors are on the roles of the hiring agencies and may or may not be hired as permanent staff by the company.
The second person quoted above said a major chunk of subcontracting within the company is done by the Talent Acquisition Group (TAG) while the RMG addresses only a miniscule share of this base.
Roughly 12% of the TCS global workforce at a given time would be subcontracted employees — of which around 2% of the subcontracted workforce is brought through RMG, industry experts told ET. As per TCS’ last annual report, there were 2,527 non-permanent employees out of its total workforce of 615,721. RMG-related resources comprise less than 3,000 employees subcontracted across tech, admin and secretarial roles, said sources.
TCS has now roped in external advisors along with the current investigation team to address the matter.
Data also reveal that over the past two years, TCS has seen subcontracting costs rise exponentially amid an aggressive talent war across the technology sector. In fiscal year 2022, fees to external consultants, a majority of which relate to subcontracting, rose 31.7% on year and in fiscal 2023, the cost was up 22.5% to Rs 21,337 crore.
People in the know confirmed that Sivakumar Viswanathan has been appointed as the interim head of RMG. The company has not responded to queries on this matter.
ET had reported on Monday that the number of firms under scrutiny could be higher, as the investigation is currently ongoing. The incident may also spark a greater scrutiny of hiring processes within other IT firms.
Experts also said cases of bribery for recruitment could have gone up during 2021-22, just like moonlighting, when tech talent witnessed accelerated demand and attrition rates hit record highs. During fiscal 2022, top four Indian IT service firms – TCS, Infosys, Wipro and HCLTech – hired more than 220,000 people between them. A significant part of this number hired straight from campuses and staffing firms have no role to play in that recruitment.
The share of subcontractors among the top IT companies is 6-8%, while it is 3% in the overall tech Industry, as per industry estimates.
