HIRE Act: Indian Talent at Risk, US Pushes for Onshore Jobs

In a move that could drastically alter the global outsourcing industry, the United States is considering the HIRE Act 2025 (Halting International Relocation of Employment Act) — a legislative proposal that seeks to discourage American companies from outsourcing jobs overseas. If passed, this new law would impose a 25% tax on payments made by US firms to foreign individuals or companies providing services for American clients.

The proposal comes just weeks after the US introduced a controversial $100,000 H-1B visa fee for new applications filed after September 21, making it increasingly difficult for skilled Indian professionals to work in America. Experts warn that the HIRE Act 2025 could further disrupt India’s IT and services export ecosystem, which heavily depends on American corporate contracts.

HIRE Act: Raghuram Rajan Raises Alarm Over Service Tariffs

Former Reserve Bank of India Governor Raghuram Rajan has expressed deep concern over the potential ripple effects of this proposed legislation. Speaking in an interview with DeKoder, Rajan warned that the HIRE Act could mark the beginning of a dangerous shift in US trade policy.

“What we’re seeing is a creeping extension of tariffs from goods to services. This is a threat,” Rajan stated. “The HIRE Act could directly tax outsourced work, which has wide implications for countries like India that rely heavily on service exports.”

According to Rajan, the HIRE Act 2025 represents a broadening of the protectionist stance that initially focused on physical goods but now appears to be extending into digital and intellectual labor — a sector dominated by Indian talent.

Understanding the HIRE Act 2025

Sponsored by Senator Bernie Moreno, the HIRE Act 2025 aims to “bring jobs back to America” by discouraging US firms from seeking cheaper offshore labor. Its central clause mandates a 25% outsourcing tax on payments made to foreign entities when the ultimate consumer of those services resides in the United States.

Under the proposed legislation, US companies:

• Cannot claim tax deductions on outsourcing payments.

• Will be taxed 25% on any payments to foreign contractors or organizations serving US clients.

• Face increased scrutiny on contracts involving offshore personnel or digital service exports.

The bill broadly defines “outsourcing payment” as any fee, royalty, service charge, or premium paid to a foreign individual or company in the course of doing business that benefits American consumers. This could encompass a wide range of operations — from customer support and software development to IT consulting and remote technical services.

HIRE Act: How the HIRE Act 2025 Could Impact Indian IT and BPO Sectors

The Indian IT industry, which earns the bulk of its revenue from US clients, is likely to face multiple headwinds if this act becomes law. The following outcomes are anticipated:

1. Drop in Outsourcing Demand

A 25% outsourcing tax could make offshoring to India less financially attractive for US companies. As a result, there may be a decline in contracts, leading to fewer opportunities for Indian developers, analysts, and consultants who work remotely for American clients.

2. Pressure on Visa Programs

Although the HIRE Act 2025 doesn’t directly amend visa laws, it reinforces the broader political message of “Hire American.” This may further reduce corporate willingness to sponsor H-1B and L-1 visas, tightening employment prospects for skilled Indian professionals aspiring to work in the US.

3. Decline in IT Export Revenues

India’s technology exports to the US — a key pillar of the country’s foreign exchange earnings — could see a significant dip. Industry experts suggest that the new tax, combined with the H-1B fee hike, could push American companies to either automate more functions or onshore operations, cutting India’s competitive edge in service delivery.

A Shift Toward Protectionism

Economists believe that the HIRE Act 2025 signals a return to aggressive protectionism reminiscent of early 2010s rhetoric. While American policymakers claim it would protect domestic jobs, critics argue that it ignores the reality of a globally integrated digital economy.

Indian outsourcing firms like Infosys, TCS, and Wipro, which derive up to 60% of their business from North America, may be forced to rethink their global delivery models, potentially increasing local hiring within the US to mitigate the impact of the tax.