Indian IT lay off to continue

As digitisation and automation has increased, IT companies like Infosys, Cognizant and Tech Mahindra have witnessed a series of layoffs. Experts say, this is likely to continue for the next 1-2 years.

Layoff in Indian IT sector

India’s Information Technology Companies (IT) are during the industry’s largest retrenchment drive, with seven of the biggest IT firms planning to ask at least 56,000 engineers to leave this year. The number of lay off this year is twice as compared to last year.

Cognizant has placed more than 15,000 employees in the lowest category and Infosys has placed around 3,000 senior managers in the category of employees needing improvement. DXC Technology is during a three-year plan to reduce the number of offices in the country from 50 to 26. The company plans to ask 10,000, of its 170,000 employees to leave this year.

Why this lay off?

The companies have been justifying the layoff on basis of ‘marginal’ increase in the number of poor performers because a more rigorous performance evaluation process.

However, the root of the problem is the change in the business model that Indian IT companies are wrestling with. As the IT companies are working towards newer technologies like Cloud Computing, Artificial Intelligence and Robotic Process Automation, the industries are moving away from a people led model, which means they need lesser employees

Analysis

In 2016, India witnessed the largest lay off when Larson and Turbro decided to terminate 14000 employees. The layoff was carried out to get the workforce in the right size and to do away with ‘redundant’ jobs. However, the main reason suspected is automation. Similarly, in 2008, Jet Airways laid off around 1000 employees to rationalise its operations and cut down the cost.

US had experienced layoff in October 2008 where the number had exceeded 200,000. The layoff was done to cut production as the consumers were struggling with their own finances. The Bureau of Labour Statistics reported that in September 2001, 2269 employers each laid off 50 people or more after the 9/11 attack coincided with the recession.

The world is moving towards automation which shows technological development but could this could have serious consequences. India, which is a country that has a large population, automation would add to the problem of unemployment. Also, the purchasing power is also likely to reduce with automation as many would be jobless.

Assessment

Organizational downsizing is not the best alternative to cut down the cost in fact it might lead to more. During layoffs, severance payments to the employees, continued health care payments and unemployment charges may incur more expenditure and affect the economy.

Many companies fail to realize that they have long term capital investment on their employees. Also, wages may be an expense on the budget but they are more as payments for the skill of the employees that contribute to the growth of the company. Thus, Layoffs creates an impression of personnel uncertainty that might lead others to quit too.

Instead of layoff, the companies should resort to restructuring. These include closing down obsolete plants and branches and improving internal processes.

However, in situations of layoffs interests of the employees should be protected by providing them basic facilities for their survival during unemployment and the government should create more jobs to avoid the employment situation.