The Halting International Relocation of Employment (HIRE) Act has been introduced in the US Senate with the aim of curbing outsourcing and protecting American jobs. 

What is the objective of the HIRE Act?

The ‘Halting International Relocation of Employment Act’ or HIRE Act aims  to stimulate  job creation in the US by disincentivising US companies from outsourcing business operations or tasks to foreign workers. The legislation aims to impose tax on any companies that prefer foreign labour over American workers, with revenue to be used for workforce development programs benefiting  the American middle class.

What are the main provisions of the Act?

The Act creates a 25 per cent tax on ‘outsourcing payments.’ which are defined as any money paid by a US company or taxpayer to a foreign person in relation to any work that benefits consumers in the US. It also prohibits companies from deducting such outsourcing payments. Further, the Bill also calls for the creation of a “Domestic Workforce Fund” from the money raised from the outsourcing tax. The fund is intended to support apprenticeships and workforce development programs.

What are the next steps to making the Bill into an Act?

Immigration attorneys note that the Bill has now been introduced in the Senate, but being a legislation seeking to raise taxes and involving amendments to the Internal Revenue Code, such legislation must be introduced in the House of Representatives also. Once passed there, it then goes to the President for assent. Speaking to American media, Senator Bernie Moreno, who has introduced the Bill said that he was going to put the Bill, on the floor next week. “We will know which Republicans are on board and which ones aren’t and will make the Democrats take a vote,” he said.

Will there be opposition to the Bill in the US parliament?

Experts say that the move will hit the profitability of the American companies, and there will be pushback and resistance from large and small American corporations that will be taken to their House of Representatives. There have been such attempts in the past, too, and it has not materialised, they said. However, given that rhetoric and emotions have been dictating policy-making in the US, the Indian services sector remains cautious.

What is the current position on taxing services?

The World Trade Organization currently has an agreement between members to refrain from imposing duties on digital services, a practice that was first adopted in 1998 and most recently renewed in early 2024. This moratorium on taxation of digital services also comes up for review in March 2026. Further, from India’s side, at the onset of the trade agreement with the US, India also removed the equalisation levy. 

What types of Indian IT companies will be affected  by this Act?

The Bill, if enacted into law, will essentially raise the effective cost for US companies to outsource any services (IT, operations and business services) to offshore locations outside the US and impact their margins to that extent. The Bill defines the payments as those made to any “foreign person” and could thus include contractors, freelancers and even captive centres, experts note. Depending on the existing cost structures, it may slow down the work that US companies send to Indian IT and business process management providers. However, some analysts note that it will be tough for US companies to manage their technology and operations at scale with the American workforce. The skill sets and talent availability at scale in India or other countries will ensure outsourcing is not completely stopped, they said.

Published on September 8, 2025