How Will the New OSP Guidelines Affect Work-From-Home Policy in the IT Industry?

It is said what can’t be cured, must be endured.

Sadly, COVID-19 has brought this evergreen realism back into vogue as every single individual, authority, industry and entity globally has been trying to adapt to its impacts by incorporating new and progressive trends. And the work-from-home culture tops the list of these trends.

In order to enable working professionals cope better with the effects of the pandemic whilst meaningfully liberalising the ITES sector, the Government issued a set of guidelines to facilitate operation of ‘Work from Home’ and ‘Work from Anywhere’ protocols that have been adopted ever since the lockdowns went into effect.

Whom Will the Guidelines Benefit?

The target group for these guidelines are ‘Other Service Providers’ (OSPs), who are defined under the guidelines to mean an entity that exists in any of these legal characters as long as they provide voice-based Business Process Outsourcing (BPO) services:

• Indian company registered under the Companies Act, 2013
• LLP (Limited Liability Partnership) registered under the LLP Act, 2008
• Organisation registered under Shops and Establishment Act

Basically, any entity that provides application, IT-enabled or simply outsourcing services (by taking the help of telecom resources) is referred to as an OSP. Terms like BPO, KPO (Knowledge Process Outsourcing), call centres etc. Are also used for OSPs.

The rules have been comprehensively modified to accommodate the changing work dynamics, working hours and productivity of employees in the industry. It also reduces compliance burden on the companies to make their revamped operating protocols legally tenable.

What Are the Changes?

One, registration process for purely data-based OSPs has been done away with. Only the voice-based OSPs (certain BPOs) need to be registered from now on.

Two, people working from home will now be treated as “Remote Agents” of the company, allowing him/her to work from anywhere in the country.

Three, some of the compliance obligations (deposit of bank guarantees, IP addresses, reporting requirements, routine publication of reporting obligations, publication of network diagram and penal provisions) have been exempted.

Four, many functional impediments in the smooth operation of OSPs have been removed, such as permitting interconnectivity between domestic and international OSP Centres of the same or different companies. Plus, permitting interconnectivity between the Remote Agent to the firm’s OSP resources.

Rationale Behind the Changes

Over the past few months, the Government has taken various measures to instrumentalise convenient work-from-home operations.

The DoT had extended the time period for exempted work-from-home norms (for IT and ITeS industry) to take effect until July 31st, which was subsequently pushed further to December 2020. The IT industry was rallying efforts to make this extension permanent so that employees could deliver services remotely.

Nasscom advocated amendment in the current regulations so that intra-company flexi policies and long-term initiatives can be put in place to cope with the changing work landscape. It had also suggested that companies be allowed to take out duty-free assets (laptops, projection systems) outside their offices on a permanent basis subject to work-from-home conditions.

However, an independent research conducted in April 2020 showed that 99.8% workforce in the IT sector is incapable of remote working. The operative word being ‘incapable’, indicating it is the lack of institutional and physical equipment that is the hurdle, not their willingness.

How Far Can the Industry Bank on These Changes?

The simplification of these guidelines is a step in the direction of remediating this lack of equipment. Removing regulatory bottlenecks to help flourish an industry that contributes over 8% to the GDP and has a 46% share in exports, is praiseworthy.

But there are a few things to consider. First of all, a complete exemption of registration for data-based OSPs may sound convenient (in an otherwise tedious red-tape regime), but it does pose uncertainties with regard to authentication.

Secondly, simply de-regulating sector-specific guidelines may not suffice without issuing fresh labour and employment codes (plus tax laws) to work in tandem. The work-from-anywhere narrative follows potential discrepancies in matters of jurisdiction over tax filings and withdrawing employment benefits, which merits clarification.

Another thing. The gig economy is certain to receive a major boost in pursuance of these guidelines as most employees tend to work for more than one employer (especially if they are based out of remote locations). This should accompany access to employee benefits and withdrawals by enabling choice of social security schemes (between NPS and EPFO).

(FYI: Perhaps, this could restart the dialogue on extension of the SEZ policy as well. Won’t it be wiser to relax the requirement of forex payment for services rendered in DTA? Especially since employees won’t be working on-site the SEZs anymore making the existing arrangement redundant.)

In any case, a welcome change is imminent. Looks like work-from-home is here to stay.

(Originally published November 9th 2020 in transfin.in)