Software engineers being laid off from technology firm Tata Consultancy Services may have their day in court. On Tuesday, the Madras High Court stayed the termination orders of a TCS analyst who moved the court on the grounds that in calling her an under performer and asking her to leave the company was a violation the Industrial Disputes Act.
Layoffs in the Indian IT sector are not uncommon and neither is the retrenchment of mid- to senior-level employees. Tech companies prefer to keep costs in check by hiring cheap labour at the entry level. But the scale of the TCS layoffs – early reports suggested some 25,000 workers, many of them mid-level assistant and associate consultants, could be let go – has all the entire software engineering community on tenterhooks. So much so that some have banded together to form a Forum for IT Employees or FITE.
“Our main demand is that, if you have to do retrenchment, do it in a proper manner,” said B Venkatesan, coordinator of the Bengaluru chapter of FITE. FITE contends that in a cost cutting move, people hired last should be fired first. A TCS employee in Bengaluru who has been served a termination notice told Scroll that it was unfair that many of them were being branded under performers when their performance reviews said otherwise. “When they are ‘meeting expectation’ how can you remove them?” she asked, upset that she has been asked to leave when TCS has announced plans to hire 55,000 freshers in the coming year.
Company denies reports
Meanwhile, TCS has denied reports of large-scale layoffs saying that the company had asked 2,574 people to leave in the first nine months of the year, which is 0.8% of its total employee strength. More than 2,100 people had been laid off in the previous two years. In its statement the company said that the total involuntary attrition for the year would be only around 1%.
Earlier this week the FITE Bengaluru filed a petition with the Karnataka Labour Commissioner asking for government intervention in what it calls the “illegal termination” of TCS employees. FITE has also drawn up an online petition to the Prime Minister to “immediately stop the indiscriminate job termination of employees” and order TCS to reinstate those who has already been served notice by the company.
Some IT industry watchers believe that this massive downsizing of manpower is inevitable and even necessary. The much talked about pyramid structure of employees in Indian IT companies has been getting bulky in the middle and this is seen as a factor of the sector’s slowing growth. Former Infosys human resources chief TV Mohandas Pai said in an interview to The News Minute that “this blood-letting is good for the industry”. Pai believes that the layoffs will release talent for smaller tech companies and fulfil IT requirements in the banking, finance and defence sectors.
Deepak Shenoy, founder of financial analytic company Capital Mind , says that IT companies have been largely inefficient in keeping up with the start-up economy and changes in automation. Retrenchments are how they will play catch up. The situation at TCS, Shenoy argues, is just the beginning. “TCS is getting in really early," he said. "Their margins haven't been hit badly. They are preempting it. They have seen the writing on the wall.”
Incentives and exemptions
But inefficiencies is exactly what successive central and state governments have tried to avoid as they bestowed incentives on the sunrise sector that has been India’s biggest hope for creating and sustaining jobs.
Since 1999, the Karnataka IT industry has been exempt from standing orders applicable to commercial establishments. The standing orders requires that a company that employs more than 100 people categorise workers as temporary or permanent, specify hours of work, shifts, leaves and holidays. A company also needs to enumerate the procedures for termination of employment and redressal against unfair treatment. The exemption, which was initially for two years, was extended five times till 2013 and has given another five-year extension since then.
The standing order exemption leaves IT workers open to hire and fire policies of their companies. Tamil Nadu, Andhra Pradesh, Orissa, Rajasthan and Madhya Pradesh have similar sops for their tech companies.
IT companies have also been exempt from paying various taxes under different provisions of the law. The Software Technology Parks of India scheme that was first established in 1991 allowed, until 2011, exemptions for all units set up in such a park from paying taxes on profits from their exports. Tech companies have also from time to time been exempt from paying minimum alternate tax, the tax on net profits for the year.
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Layoffs in the Indian IT sector are not uncommon and neither is the retrenchment of mid- to senior-level employees. Tech companies prefer to keep costs in check by hiring cheap labour at the entry level. But the scale of the TCS layoffs – early reports suggested some 25,000 workers, many of them mid-level assistant and associate consultants, could be let go – has all the entire software engineering community on tenterhooks. So much so that some have banded together to form a Forum for IT Employees or FITE.
“Our main demand is that, if you have to do retrenchment, do it in a proper manner,” said B Venkatesan, coordinator of the Bengaluru chapter of FITE. FITE contends that in a cost cutting move, people hired last should be fired first. A TCS employee in Bengaluru who has been served a termination notice told Scroll that it was unfair that many of them were being branded under performers when their performance reviews said otherwise. “When they are ‘meeting expectation’ how can you remove them?” she asked, upset that she has been asked to leave when TCS has announced plans to hire 55,000 freshers in the coming year.
Company denies reports
Meanwhile, TCS has denied reports of large-scale layoffs saying that the company had asked 2,574 people to leave in the first nine months of the year, which is 0.8% of its total employee strength. More than 2,100 people had been laid off in the previous two years. In its statement the company said that the total involuntary attrition for the year would be only around 1%.
Earlier this week the FITE Bengaluru filed a petition with the Karnataka Labour Commissioner asking for government intervention in what it calls the “illegal termination” of TCS employees. FITE has also drawn up an online petition to the Prime Minister to “immediately stop the indiscriminate job termination of employees” and order TCS to reinstate those who has already been served notice by the company.
Some IT industry watchers believe that this massive downsizing of manpower is inevitable and even necessary. The much talked about pyramid structure of employees in Indian IT companies has been getting bulky in the middle and this is seen as a factor of the sector’s slowing growth. Former Infosys human resources chief TV Mohandas Pai said in an interview to The News Minute that “this blood-letting is good for the industry”. Pai believes that the layoffs will release talent for smaller tech companies and fulfil IT requirements in the banking, finance and defence sectors.
Deepak Shenoy, founder of financial analytic company Capital Mind , says that IT companies have been largely inefficient in keeping up with the start-up economy and changes in automation. Retrenchments are how they will play catch up. The situation at TCS, Shenoy argues, is just the beginning. “TCS is getting in really early," he said. "Their margins haven't been hit badly. They are preempting it. They have seen the writing on the wall.”
Incentives and exemptions
But inefficiencies is exactly what successive central and state governments have tried to avoid as they bestowed incentives on the sunrise sector that has been India’s biggest hope for creating and sustaining jobs.
Since 1999, the Karnataka IT industry has been exempt from standing orders applicable to commercial establishments. The standing orders requires that a company that employs more than 100 people categorise workers as temporary or permanent, specify hours of work, shifts, leaves and holidays. A company also needs to enumerate the procedures for termination of employment and redressal against unfair treatment. The exemption, which was initially for two years, was extended five times till 2013 and has given another five-year extension since then.
The standing order exemption leaves IT workers open to hire and fire policies of their companies. Tamil Nadu, Andhra Pradesh, Orissa, Rajasthan and Madhya Pradesh have similar sops for their tech companies.
IT companies have also been exempt from paying various taxes under different provisions of the law. The Software Technology Parks of India scheme that was first established in 1991 allowed, until 2011, exemptions for all units set up in such a park from paying taxes on profits from their exports. Tech companies have also from time to time been exempt from paying minimum alternate tax, the tax on net profits for the year.