North Carolina economic development officials on Tuesday canceled a $22.4 million jobs-creation grant for Infosys after the technology company failed to create hundreds of promised jobs in Wake County. Remote working trends were the culprit, the company said.

Infosys asked the state this month to cancel the deal, saying it was unable to meet hiring targets stipulated in the grant. Department of Commerce officials revealed the request Tuesday during a regular meeting of the department’s Economic Investment Committee, which agreed to cancel the grant. No payments had been made to the company.

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North Carolina regularly offers financial incentives to companies that pledge to build and hire in the state. As part of the deals, commerce officials and company executives agree on annual investment and hiring benchmarks. The state then doles out portions of the grant as the company hits its targets.

Infosys, which employed more than 1,000 people in the state when the grant was approved in 2017, had pledged at the time to create 2,000 additional jobs at a Raleigh innovation hub — an expansion that was projected to grow the state’s economy by $2.9 billion. But by the end of 2023, it had only created 562 new jobs, according to documents provided by the state.

“We have seen a significant shift, with new hires not physically moving to North Carolina as ‘work-from-home’ became more widespread — especially for the technology sector,” Anant Adya, an Infosys executive vice president, said in a Dec. 6 letter to state Department of Commerce officials. “Accordingly, although we have increased the number of employees assigned to North Carolina-based projects, not all reside in the state. The mobility impact caused by the Covid-19 pandemic, and changes in working patterns, have adversely impacted Infosys’ ability to meet the criteria.”

The company currently employs about 1,800 North Carolinians, Ayda said in the letter, adding that the company remains committed to the state even though it won’t be able to meet the hiring target. The company met its 2023 investment target of at least $7.9 million. It also met its 2023 job retention target of 1,162 existing jobs. Infosys executives also say they’ve ramped up efforts to partner with the state’s universities and community colleges.

“Infosys will continue to invest in both hiring workers and our presence in the state, as our business allows,” Adya wrote. “We look forward to continuing to work with the state of North Carolina, which remains a strategically vital region for our business and a natural home for technology innovation.”

Remote work scuttles deals

State incentives are often tied to the construction or occupancy of offices or factories — to strengthen the local property tax base and ensure the state benefits from employees who are physically in the state. But the Covid-19 pandemic accelerated a change in how — and where — companies do business. The state allows companies to count remote workers toward hiring targets, provided the employees live in North Carolina.

Lockdowns and social distancing during the pandemic made remote work practices more prevalent across industries. The flexibility has helped many companies retain and recruit employees, including some who work from far-flung places. The shift has caused companies to rethink their growth strategies, an adjustment that is ongoing for some.

Several other companies have cited remote working trends and a re-evaluation of real estate as reasons for backing out of incentives deals.

Cognizant Technology Solutions sought to cancel an incentives package, including up to $2 million in grant money, in part because of work trends that left fewer people working in the company’s Charlotte office.

Syneos Health cited told state officials that “the evolution of the work-from-home landscape” caused it to reevaluate its ability to meet its incentives targets for a project in Morrisville, leading the company to request the termination of its $8.4 million incentives agreement with the state after receiving payments totaling about $874,000.

And Clorox Services Co. cited “the emergence of remote work” as one of the reasons it failed to meet hiring targets, leading to its request to cancel more than $2 million in incentives tied to a 158-job expansion in Durham.