Layoffs or Weeding Out, India’s IT Sector Is Still Vibrant

Layoffs in IT sector

Layoffs in IT sectorIt is a dream come true for many youths of our country to work for a popular MNC software firm or Indian technology (IT) company. But, the recent report of Tata Consultancy Services (TCS) employees being given the pink slips in the new year has given the workforce in the IT sector the shivers. Not only TCS, there are news reports of many well-known IT companies laying off employees, even the ones at mid-level.

However, according to a senior TCS official, only the non-performing employees in the organisation have been asked to leave. The official at the same time denied that the company is firing 25,000 employees. He claimed that layoffs are a part of every organisation’s employment policy. Regarding TCS, he also said that the impact will be on only 1-2 per cent of the 3.1 lakh people employed in the company. TCS is considered to be India’s biggest outsourcer.

This layoff news is coming at a time when the companies are in the process of reporting their December quarter earnings. For employees in the IT sector, such news reports pave the end of a golden period for India’s outsourcing sector, which is over $100 billion worth and which employs more than 30 lakh people.

Layoffs in the IT sector is not new

Yes, it is true that layoffs in the IT sector or for that matter any organisation is nothing new. To gear up the performance of an organisation, layoffs or retrenchments do take place. The software firm has reportedly denied the sacking of employees and has maintained that the recent layoffs are only for those employees who are not performing well and as a performance driven organisation, it is necessary for TCS to optimise its workforce, including considering employee performance, business needs and people aspirations.

Earlier layoffs in the Indian IT sector

  • Last year, Yahoo India sacked more than 2,000 employees.
  • Cisco Systems sacked 4,000 employees, hired 2,000 freshers
  • Satyam Computers laid off 4,500
  • Wipro – 5,000
  • Infosys – 3,456
  • Microsoft – 700
  • ITC – 5,600
  • Reliance – 6,700
  • IBM India – An unknown but sizeable number
  • Dell: -do-
  • HP: -do-
  • Intel: -do-
  • Cognizant: -do-

Reasons for layoffs

  • Termination of employees is a part of the “restructuring process” of the organisation.
  • Companies prefer to keep freshers at low salaries rather than retaining mid-level and senior employees at higher salaries.
  • The major client of the Indian IT sector is the US economy. The slowdown of the US economy has thus affected the IT sector.
  • The rising value of rupee has also become an issue of concern leading to decrease in exports and outsourcing, the declining profits and the unemployment being generated. The decreasing profits as a result of the rising value of money has led to work assignments’ reduction, thereby forcing companies to cut its workforce.

Forming of trade unions: Unionisation of employees

The frequency of layoffs in India’s IT sector is increasing over the years. The recent case of TCS has opened the way for formation of trade unions to get involved into the working of IT industry, which has had never any unionisation of its employees. The Madras High Court stayed the termination order of an analyst of TCS who sought the help of the court on the grounds of calling her a non- performer and asking her to leave the company. This was a violation of the Industrial Disputes Act.

According to a news report, trade unions like the All India Trade Union Congress (AITUC) and Centre of Indian Trade Unions (CITU) have come out to support TCS employees who are facing termination. This can really bring about a unionisation among the IT companies in India.

Some sacked employees have already sought the help of the labour departments in Tamil Nadu, Karnataka and Kerala. In fact, a Forum for IT Employees (FITE) has also been launched by a group of IT professionals based in Chennai called the Young Tamil Nadu Movement. The motive is to mobilise employees who have lost their jobs on the pretext of “involuntary attrition”. The group has also threatened to take legal action against the company for laying off employees. The FITE is also launching a campaign with a mass petition to Narendra Modi to stop this “unjustified termination.” Employees who have been sacked have complained about lack of communication and transparency in the entire process.

India Skills Report 2015

The recently released “India Skills Report 2015” has estimated that more than 72 per cent employers of major companies will prefer to hire candidates below 35 years of age in the coming years. The report was released at the 6th Global Summit on Skill Development by the Confederation of Indian Industry (CII). It was a joint initiative by Wheebox, PeopleStrong and LinkedIn, in collaboration with the CII.

Age-wise, candidates below 24 years will be the most preferred group for 50 per cent of employers, the next major age group is 25 to 30 years, preferred by 30 per cent employers, followed by the age group 31-35 years getting only 15 per cent employers. The senior level age group of 35-55 would account for only eight per cent employers, whereas the candidates in the senior most brackets 56-65 years are expected to have little preference with .02 per cent.

The year 2014 has already witnessed a growth of hiring across the industries in India. This upscale is going to continue in 2015 and the coming years and software, hardware and the IT sectors will continue with the upsurge in demand of talent, as reported in the India Skills Report 2015. The report also predicts that almost 18 per cent increase will be seen in the hiring numbers compared to last year. Hiring will continue to rise in 2015 in the software and IT sector.

Are layoffs good in the long run?

With Modi’s vision on youth and emphasis on skill development, the preference for the young workforce can be considered good news as about 12 million youths are expected to join the workforce every year. With India becoming one of the fastest growing economies, creation of more jobs and development of more skills are necessary to ensure sustainable growth.

According to IT experts, layoffs or downsizing of manpower is necessary. The reason being in most of the IT firms the pyramid structure of employees get bulky in the middle and this is considered as a cause of the IT sector’s slowing growth. According to a former senior HR official of Infosys, the layoffs are good for the IT industry. The layoffs will release more talent and skills for the smaller tech companies and can also fulfil information technology requirements in the finance, banking, and defence sectors.

Most IT companies have been largely not efficient in keeping pace with the start-up economy and changes in automation. Retrenchments are the only ways by which they can catch up. The situation at TCS is just the beginning. It is not that TCS is not doing well in the last financial year. Their margins are profitable but they are pre-empting it.

All said and done, fear and apprehension has overtaken the IT sector in India. It is really very difficult to actually come to a definite conclusion as to whether layoffs are essential or not for IT companies as experience counts.


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