Tax break fuels anger over outsourcing-related layoffs in Fla.

Nielsen gets tax breaks to hire local workers, then outsources some jobs

Nielsen Co., the media company known for audience measurement, has given up tens of thousands of dollars in local tax breaks this year after signing an outsourcing deal with an India-based offshore provider.

The move, which has drawn negative reviews from local officials, came after the company announced it would lay off 117 workers at its global technology center Oldsmar, Fla.

Although companies that hire outsourcing firms often try to limit the release of information about layoffs through employee nondisclosure agreements tied to severance and public statements, Nielsen was unable to do so in this case.

That's because it received property tax breaks in 2001 to build a $100 million global technology center in Oldsmar. The tax breaks were pegged to the number of high-wage jobs -- those that paid at least $52,000 -- the company created. That forced Nielsen to disclose hiring details at that facility, effectively putting the employee count of the facility on the local political radar.

In April, when the layoffs were reported locally, Oldsmar city council members responded angrily to the move, according to the minutes of one meeting (download PDF). One council member accused the company, its largest employer, of "making a joke of the tax incentive program," and another charged that Nielsen "had abdicated their responsibility as a corporate citizen." Adding fuel to the fire were local media reports, which publicized the layoffs and the council's reaction.

Nielsen had about 1,200 workers at the facility when the incentive agreement was reached, an employee count that gradually grew to 1,700. But last October, Nielsen announced a 10-year outsourcing agreement valued at $1.2 billion with Tata Consultancy Services in Mumbai. The move was designed to allow Nielsen to integrate and centralize IT systems.

That deal was followed this year with the news that 117 employees would be laid off. Although 50 of those workers have been hired by Tata, Nielsen last week announced it was cutting anotherr 170 jobs -- and some of those affected are training Tata employees to do their work. The company expects to have about 1,300 employees by year end at its facility, with the addition of another 250 or so contract workers.

Gary Holmes, a spokesman for Nielsen, said the decision to pull out of the incentive program followed the Oldsmar city council's "second thoughts about the agreement" and the impact of all the attention on the layoffs. "It became kind of an emotional issue," Holmes said.

Nielsen's layoffs also drew attention from CNN's Lou Dobbs, who has railed against the H-1B program. India offshore providers are major users of the H-1B visa, with Tata getting 797 of the visas in 2007. Opponents cite the visa's use in outsourcing to counter tech industry claims by Bill Gates and others that the visa is used to hire "the best and the brightest" foreign graduates of U.S. universities. Congress is currently struggling to find a middle ground through legislative efforts to give a Green Card, or permanent residency, to foreign nationals who receive advanced degrees from U.S. universities.

Under the original 2001 agreements, Nielsen has received some $3.1 million in tax incentives for its Oldsmar facility, which includes $1.7 million in breaks from the state and $1.4 million from Oldsmar and Pinellas county. The local incentives run to 2016 and will depend on how many high-paying jobs remain in place during each year of the agreement.

Holmes said Tata is helping the company move away from proprietary systems toward an infrastructure that integrates a variety of reports and data on one platform. No additional layoffs are planned this year, he said.

Whether the issue of tax incentives is a closed matter, remains to be seen. After being asked about the issue, Oldsmar Mayor Jim Ronecker said in an e-mail that there are "continuing discussions' with Nielsen. He declined further comment.

Despite the recent layoffs, local officials said the incentive program had done its job. Nielsen could have built its technology center somewhere else, said Mike Meidel, director of Pinellas County Economic Development. And even with the layoffs, the company had hired enough employees to continue to qualify for the tax incentives.

"The incentive did everything it was intended to do," said Meidel. "We have more employees here today at higher wages than when the incentive began."

Greg Rublee, an Oldsmar council member, said that Nielsen, by ending the tax incentive agreement, has "prevented anyone from looking over their shoulder."

He criticized the H-1B visa program, saying it was never meant to be used as a way to replace U.S. workers. While the Tata employees are supposed to be paid prevailing wages, that pay doesn't account for retirement and other benefits that U.S.-based employees receive. "IT people all over the country should be fearful of this," he said.

Copyright © 2008 IDG Communications, Inc.

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