There are tax and labor law changes that are now crawling through the Washington, D.C.’s infamous political maze that if they make it through could draw more calls home or offshore, reports Jeff Furst, president and CEO of staffing solutions firm FurstPerson.

 

The White House plans to require companies from deferring any foreign-investment-related deductions such as for interest expenses associated with untaxed overseas investment until the company repatriates its earnings back home. Companies would only take a deduction on their U.S. taxes for foreign expenses when they also pay taxes on their foreign profits in the United States. The Administration plans to rein in foreign tax credits, basing them on the amount of total foreign tax the taxpayer actually pays on its total foreign earning. Also such tax credits would no longer be allowed for foreign taxes paid on income not subject to U.S. tax.

 

Congress is now considering the Employee Free Choice Act of 2009 (H.R. 1409, S. 560), which if passed would allow union representation of a nonunionized workplace without having a vote if the majority of employees sign cards authorizing as such. There would be special procedural requirements for reaching an initial collective bargaining agreement following certification or recognition and tougher enforcement on unfair labor practices. The legislation would add remedies for such violations such as back pay plus liquidated damages and more civil penalties.

Jeff Furst, writing in his blog, asked that assuming that Congress passes Obama’s plan, will this possibly accelerate the growth of outsourced home agent programs. The answer is likely yes. He said the home agent model is said to provide cost competitiveness to some offshore models while offering an expanded labor market that provides a better caliber candidate.  Plus, the jobs will stay in the U.S.

Furst also asked if the tax law changes combined with the card check legislation dramatically impact the number of U.S. based call center jobs. The answer is also possibly yes. 

 “If U.S. based outsourcing firms find that they are no longer cost competitive utilizing a global workforce strategy solely because they are based in the U.S. and they risk increased costs due to possible unionization, many of these firms may determine to relocate to a more favorable economic environment,” said Furst.

There are other cross-cutting potential impacts from both bills. The card check legislation may accelerate contracting out to independent home-based agents, say other observers, if contact centers, which have very low unionization rates, start to become organized. These independent contractors offer the cost saving and quality benefits of home working with greater flexibility than with employees, though at the price of less management control.

The higher taxes in the tax law reform could also drive American outsourcers to relocate their headquarters offshore. That is because these added costs,--which must be priced in as outsourcing margins are razor-thin—may make U.S. firms less successful in winning programs against their better-located offshore-based competitors

Recent TMC (News - Alert) articles on the tax changes cite Datamonitor analyst Peter Ryan who commented: “should vendors find themselves financially pressured into moving more operations back onshore in the U.S., it could easily have a negative impact on daily operations, given the traditionally high attrition rates associated with domestic contact center work.”

Ryan also added that: “If American outsourcers are forced to raise their prices because their taxes are going up, it would be very logical for clients to switch to offshore-based providers with equal capabilities and qualities who offer better rates. There is no shortage of such firms. American outsourcers may have no other choice but to join them in tax-friendlier nations, taking their administrative, IT, marketing and other jobs with them.”