So Will IT Layoffs Really Run Into Lakhs? What The Experts Say

Japanese brokerage firm Nomura, in a research note, said that the job cuts will amount to about 2-3 per cent of the overall headcount.

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So Will IT Layoffs Really Run Into Lakhs? What The Experts Say

For the last few years, the layoff rate in IT sector has been lower, at about 1 to 1.5%.

New Delhi: 

Highlights

  1. IT firms deny out-of-the-ordinary pink slips
  2. 2 to 3% layoffs this year, up from 1 to 1.5%, say experts
  3. Layoffs partly because of automation, under-skilling, say experts
Infosys denies it. Wipro denies it. IT industry body NASSCOM denies it. But reports of mass layoffs at IT firms have crowded headlines recently with claims like this is the worst hit for the $150 billion outsourcing sector since the economic downturn of 2008.

In the last three months, people have been removed from the workforce of companies like Infosys, Cognizant and Wipro. Executive search firm Head Hunters India has said the job cuts in IT sector will be between 1.75 lakh and 2 lakh annually for the next three years due to under-preparedness in adapting to newer technologies.

Japanese brokerage firm Nomura, in a research note, said that the job cuts will amount to about 2-3 per cent of the overall headcount of nearly 7,60,000 by Infosys, Cognizant, Tech Mahindra and Wipro, an estimate that several sources in Bengaluru agreed with. For the last few years, the layoff rate has been lower, at about 1 to 1.5%. Remember a percent here can make a difference of 7,000 jobs.

Wipro has asked 600 people to leave based on appraisals that found they under-performed; the Press Trust of India claims that number could climb to 2,000.

Cognizant appears set to cut at least 6,000 jobs, which represents 2.3% of its total workforce, according to this report, which also claims that Infosys is expected to ask 1,000 employees to exit.  

In Cognizant's case, a group of employees have complained to labour officials about wrongful termination. They say that underperformance is being used as an excuse to sack them.

Infosys says there's nothing out of the ordinary with this year's layoffs, though it did not share figures. "A continued low feedback on performance could lead to certain performance actions, including separation of an individual and this is done only after feedback. We do this every year and the numbers could vary every performance cycle," a statement said. The firm refused to comment on how many layoffs it will exercise this year.

No company would, of course, want to invite bad PR by talking about large-scale pink slips.

We spoke to people in the industry, some of whom did not want to be named because of company policies.

The understanding from these conversations in brief: Yes, people are getting fired for varied reasons - including reduced profit margins. No, the numbers may not be unusually larger than normal.

So why are people losing their jobs? This, remember, is according to senior executives in top IT majors who asked not to be named:
  • Many fresh graduates do not have what it takes. Infosys founder Narayana Murthy and other IT leaders have spoken about how many of the newly qualified lack the required job skills. They need training on the job, and if they still don't measure up, they are shown the door.
  • The IT industry is undergoing huge changes as employees' skill sets no longer match market realities. IBM had layoffs starting around 2015. The move to cloud computing, automation, etc meant a totally new set of skills were needed. Jobs simply disappeared as the industry moved away from old ways and embraced the new. Left behind - those with skills which were valid and needed till just a couple of years ago. Also, companies felt there was no need to pay the salary of an actual person when new tools and technology were taking care of the job.
  • The Trump Effect, partially. America and countries - in Europe and elsewhere - are looking inwards to find employees as outsourcing becomes an even dirtier word and protectionist policies surge. Infosys will be hiring 10,000 Americans over the next year. It would seem logical that this would be at the cost of Indian fresh hiring or existing jobs.
  • A cyclical pattern. There are phases where jobs are available in more numbers than others.
  • It is appraisal season which is something many don't survive. A certain percentage of employees do lose their jobs each year.
 People we spoke to offered these tips as priorities:
  • Reskilling, upskilling of employees to keep themselves valid in a changing market.
  • Universities and training institutes to respond by updating their curriculum to make sure their graduates are not entering the job market with outdated skills
  • The need for India's IT industry to move even more towards innovation - and away from body-shopping and back-end work.
Within the IT industry, employees we spoke to said that people were losing their jobs. But their feeling was that the number of those fired from their jobs this year was higher but not significantly more than the previous two years.

NASSCOM has said the reports of mass layoffs are not accurate. Their statement says, "...recent media reports of mass layoffs by IT companies in India ...are incorrect. In fact the industry continues to hire 1.5 lakh people every year, though the focus is shifting from scale to skill."

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