Tar Heel Tattler - March 2006

State wants company's jobs, not its business
By Frank Maley

When a company offers to create 900 well-paying jobs, it’s usually a no-brainer for the state Commerce Department. Officials craft an incentive package to cinch the deal and rush to get it signed before another state ups the ante.

But it’s not so simple when the company offering to create the jobs is Lincolnshire, Ill.-based Hewitt Associates Inc., a human-resources outsourcing and consulting company. Hewitt makes money — about $2.8 billion in revenue in 2005 — mostly by persuading companies to get rid of HR and other employees and let it do their work. Which means that adding 900 jobs to the 600 in Hewitt’s Charlotte office could have happened by eliminating more jobs among its Tar Heel clients. Case in point: Hewitt won a contract with Charlotte-based Wachovia last year to provide payroll and other services. The bank eliminated at least 219 jobs and says Hewitt hired 168 of those it let go to do the work. Hewitt wouldn’t say.

The state’s solution: Offer Hewitt a package that could total $8 million but ask it not to do business — or much business, anyway — in North Carolina. The state wrote into the deal that most new jobs must replace out-of-state jobs. But it allowed 135 hires for work previously done in North Carolina by clients to count toward the 900 that Hewitt needs to max out its incentives. The state, in essence, will be paying to keep those jobs, says Don Hobart, general counsel for the Department of Commerce. “That type of outsourcing is likely to occur anyway, and if you don’t have some provision that encourages the maintenance of those jobs in North Carolina, then they’re simply going to be going somewhere else.”

Hewitt will spend at least $8 million on expansion but could get more than that in incentives, thanks to side deals worth $377,000 with the city and Mecklenburg County. Though a company spokesman says it doesn’t plan to use all 135 of its slots for replacing in-state jobs, it can. And nothing prevents Hewitt from winning more business from Tar Heel clients. It just wouldn’t count toward the 900 jobs it needs to get the full $8 million.

Without the deal, Hobart says, North Carolina might have lost those jobs altogether. Many are portable, and Hewitt was considering expansion in three other states. “This is a net gain to North Carolina,” Hobart says.