Recently, Ohio Senator Bernie Moreno introduced the HIRE Act, a bill that could significantly affect the IT sector and companies outsourcing work overseas.
What the HIRE Bill Proposes
The HIRE Bill proposes two major changes for US companies:
- Impose a 25% excise tax on payments made to foreign persons for services that benefit US consumers.
- Ban tax deductions for outsourcing payments to foreign companies.
The goal of the bill is to protect American jobs by discouraging companies from sending work abroad. The collected tax revenue would be used to fund domestic training programs for US workers.
Impact on the IT Sector
Moshe Katri from Wedbush Securities described the bill as “impractical.” He warned that companies may face bottlenecks, as training domestic personnel takes time and resources.
The US IT sector is already experiencing slow growth. Many projects are being delayed even though the project pipeline remains strong. If the HIRE Bill becomes law:
- US enterprises paying for outsourced work to India would face higher taxes.
- Top offshore IT companies may need to focus on cost reduction and exploring generative AI opportunities to remain competitive.
Chances of Passing
Katri noted that the HIRE Bill currently has about a 50% chance of passing in the Senate. The current US administration favors pro-business policies, which may reduce the likelihood of the bill becoming law.
Conclusion
The HIRE Act could reshape outsourcing in the US by making foreign services more expensive. Companies outsourcing to countries like India will need to adjust strategies, either by hiring domestic workers or optimizing operations with technology like AI. The IT sector should closely monitor this bill as it could have long-term impacts on costs and workforce planning.
Update: US HIRE Act and Its Impact on India’s IT Sector
September 24, 2025
The new US HIRE Act is creating waves for India’s IT industry by imposing a 25% tax on outsourcing payments. This could make American companies think twice before sending work abroad, affecting IT firms, freelancers, and startups in India who rely heavily on US clients. Smaller companies may struggle the most, as they don’t have the resources to absorb the extra costs like the larger players.
The Act might also push US firms to rethink how they run their Global Capability Centers in India. Many could turn to automation and AI to reduce costs, which may lead to fewer traditional outsourcing jobs. According to Rajiv Dabhadkar, founder of the National Organization for Software and Technology Professionals, this could change the flow of tech talent between the two countries and reshape the outsourcing landscape.
