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Indian Industry and Increasing Layoffs |
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Layoffs, pink slips, downsizing, termination or workforce reduction – call it by name, but this is the insecurity sword looming over the heads of all employees in all sectors in Indian industry today.
Recently the Indian job market has been flooded with news like TCS laying-off 500 employees, Yahoo! Asking 45 employees to leave, IBM laying off more than 700 employees from its Indian offices etc. Fearing the economic slowdown in the US economy, Indian companies who deal with the US companies or US multinationals in India are cutting down on the number of its employees. Starting from the IT sector, the latest news of layoffs has come from almost all the sectors of the industry.
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IT Sector
According to various reports, IT sector is facing and moving further towards a recession. Every IT organisation, whether small or big, is reducing its workforce.
- TCS, the IT giant in India, asked 500 employees (having 2-3 years of work experience) to leave
- IBM laid off 700 employees (mostly freshers) from its Indian offices
- Yahoo! Laid off 45 employees
- Comparatively smaller firms like Headstrong have also being laying off employees citing their unsatisfactory performance as the reason.
The average salaries offered and the average annual hike in the salaries in the IT sector have also seen a downfall. TCS, the leader in the software service providers in India, have reduced the variable pay or the incentives of its employees for the first quarter of 2008 by 1.5%.
Justifying the lay-offs, most of the organisations argue that the employees were asked to leave (not fired) because of their unsatisfactory performance. And the companies are doing the lay-offs in a hush-hush manner. And the organisations are not looking to re-fill the positions. As mentioned above, the dismissal of employees or the “reduction in the workforce” is being seen across most of the organisation in the IT sector. The average salaries being offered in the industry have also come down in the sector. Similarly, all the organisations are undertaking the cut in the salaries of the employees for various reasons discussed later in the article.
One of the most reputed organisation in the IT sector, Yahoo! shook the IT sector by announcing the lay offs. Without hinting on the enormity of the lay-offs, Yahoo! created speculation ripples in the industry when it laid off 45 employees from its Bangalore office. As expected by the speculators, the reason cited was cost cutting, boosting its profitability etc.
Other sectors of the economy:
A similar trend or practice is being witnessed in the other sectors of the economy as well. Siemens, a renowned telecom player, announced in the last quarter of 2007, that it has plans to reduce its workforce by 4000. The reduction in the workforce will be from its various units as a part of its restructuring plans including its IT services unit. The organisation has plans to either restructure or shut the loss making units.
The slowdown of the US economy has not only effected the IT sector and the Indian economy, but many economies and sectors across the world. Even the automobile sector has not remained unaffected. BMW has announced to cut its global workforce by thousands. As estimated, BMW plans to reduce its workforce by almost 8 percent. Again the main reason cited for the downsizing is the cost cutting and boosting profits, optimum utilization of resources etc. The axe is first expected on the temporary workers and the poor performers.
THE REASON: US ECONOMIC SLOWDOWN
The rising value of rupee from the last year as already become an issue of concern for the many sectors of Indian economy due to the decrease in exports, the declining profits and the unemployment being created.
The US economy is the major client of the Indian IT sector, the main outsourcing clients are from the US economy, which is the largest spender on the IT products and services. Now that the US economy has started showing the signs of slowdown, and is moving towards a recession, it has started creating and sending the ripples across to the Indian economy.
The Indian IT sector is majorly dependant on the US and will suffer huge losses in case of the recession in US economy. With already decreasing profits due to the rising value of money, the reduction in the work assignments is also forcing companies to cut its workforce.
Other view:
Where at the one hand there is a growing concern about the grey areas of the possible recession, many optimists economy experts believe that this situation is only a temporary phase, and will only help the Indian industry to come out of it stronger. As it is, the sector has seen a few cuts in terms of the orders received, there is no immediate threat. Moreover, the Indian organisations always have the low-cost advantage. And this slug will give time to the various sectors to focus on its core competencies and emerge for better competition in future.
And this reduction in the workforce is nothing but the usual practices of the companies on the basis of the performance or discipline. Even the top organisations like Infosys have been practicing this. It has reduced its workforce by 2500 employees spread over the last three years. The downsizing thing is coming to prominence now because of the expected slowdown and the scrutiny over every little move of the organisation.
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