With mainstreaming of tech startups, layoffs have become the new normal in India Inc

In 2009, when Tech Mahindra acquired Satyam Computer Services and said it would lay off around 10,000 “surplus staff,” the government intervened and ensured the retrenchment was called off.

Ten years later, in 2019, layoffs became ubiquitous in India. Japanese multinational Nissan Motors fired 1,700 professionals, South Korean conglomerate Samsung sacked over a hundred people, and in the months leading up to folding operations, Jet Airways laid off scores of employees across different levels. In addition, unicorn startups like Ola and Quikr reduced headcount amid restructuring efforts. And there were reports that said digital payments giant Paytm was going to lay off 500 employees, too.

In the first two weeks of 2020 already, Walmart India let go off a third of its top executives and hotels group OYO has handed pink slips to 2,400 employees. OYO has said more will be let go of over the next three months.

Yet, nobody’s batted an eyelid.

This is because, with the mainstreaming of tech startups, which are almost always reeling under losses and streamlining operations, layoffs have increasingly become an inherent part of Indian corporate strategy.

“Layoffs are cyclical and take place periodically. It depends on a multitude of factors like economic conditions, industry changes, disruptions, and performance. In some years, a lot of these factors come together and in others only a few,” said Joel Paul, India general manager for outplacement services firm Randstad RiseSmart.

Given India’s slowing economy and the current global slump, Paul expects 2020 to bring even more bad news on that front. “Some organisations may decide that since production is at a halt, workmen may be the group to be affected. Others may reason that with a slowdown, maybe support services are the right group to get impacted,” Paul said.

Tussle with tech

Technology, even though some have defended it vehemently, is a big contributor to the rise of the layoff culture in India. “On account of rapid transformations across the business ecosystem, the skill-gap in the workforce continues to grow wider,” said Neha Kaul, marketing and brand head at jobs portal Shine.com. The challenge is two-fold: Keeping up with technology as well as resisting it, she added.

Technology has been killing entry-level jobs. Automation is estimated to cut up to 30% of the jobs in India as bots take over repetitive and low-skill tasks. In 2017, for instance, two of India’s largest IT firms, Infosys and Wipro, laid off 11,000 and 3,000 workers, respectively, due to automation.

This has made it imperative for professionals to constantly upskill or reskill – or get replaced. In many cases, it is the latter as skilled workers constitute only 2.3% of India’s labour force, according to government estimates.

The changing global economic and political climate is another factor. “Companies are increasing their hiring numbers in the US, despite higher costs, to counter the increasingly stringent norms of the H-1B visa programme,” said Ajay Shah, vice-president of recruitment services at TeamLease.

India’s poor education system and weak upskilling programmes haven’t been of much help either in matching the demand for niche technologies in big tech. “When Indian IT companies chased rapid growth – which is hard to come by now – they kept adding people without realising demand patterns in the future,” Yugal Joshi, vice-president at Texas-based consultancy Everest Group, said. “Indian IT companies created bloated middle management that was pushing paper and managing projects rather than upskilling itself. As the teams become more independent and self-governing to serve the digital world, the need for a classic project manager goes down and therefore, this layer comes under a bigger threat [of getting laid off].”

Besides, many companies have also cut down on staff to bring down costs. Experts, however, don’t believe there’s much logic to this.

Cost of cutting costs

When a technology becomes uncompetitive – BlackBerry, for instance – layoffs help. However, cutting down the workforce to improve profitability doesn’t, at least not beyond the short term.

“This saving gets minimised at times when the organisation needs to give out severance pay, overtime wages to the remaining employees, and use placement services for temporary help,” said Navneet Singh, founder of HR services provider AVSAR. “Layoffs also disillusion top-ranking employees who can opt to leave the company. It causes significant negative effect on customer retention since a layoff sends a message of crisis.” And if the constant churn isn’t worrying enough, the nonchalance around it in Indian startups is only fuelling more distress.

The startup factor

“Startups are making jobs more vulnerable, for sure. Sometimes, funding dries up and they are unable to pay fat pay-packets to their workforce,” Singh of AVSAR said. “Their business models are fluid, which requires changes in skillsets.”

Such jobs are considered high risk-high reward across the world. Young firms, often experimenting with fresh ideas, have higher chances of failure. A setback may force a startup to shut shop or pivot to another idea, rendering some or all existing employees redundant.

In 2015, restaurant-delivery startup TinyOwl laid off 112 employees. Agitated employees reportedly even held the founders hostage. Less than a year later, TinyOwl shut shop. Soon thereafter, a slew of other startups met the same fate.

Internet search platform AskMe, which shut shop in August 2016, laid off over 4,000 people at once. In 2017, Bengaluru-based health-tech firm Practo got rid of 150 employees to become leaner. Last year, a cash-strapped furniture retailer, Urban Ladder, let go of 90 people and Treebo of 150 people.

Coming of age

There is always the silver lining, though. “Layoffs carried social stigma a decade ago. But now people understand that factors like geopolitics, economy, and technology contribute,” Singh said. ”They know that learning new skills and being up-to-date with technological advancements will go a long way here.”

Over time, human resources teams are also getting better at handling terminations.

“Companies have realised that an exit-management strategy is a necessity today to provide a respectful and empathetic exit to employees,” Paul of Randstad RiseSmart said. “Reductions today are handled with much care with organisations becoming prepared to communicate, help employees find and transition to new jobs, career choices, and provide support to remaining employees.”

The emotional burden on employees is a black spot, albeit one that can be overcome with the right outlook. “Layoffs can create a dent in employees’ confidence and morale; causing anxiety and depression,” said Shah of Teamlease. “However, take it as a strong reason to upskill and come back with a bang. You can then even be eligible for a higher paycheck.”

For now, though, the government is still on the workers’ side.

The Indian government proposed that the “hire & fire” clause in the Industrial Employment Act, which would allow companies to sack up to 300 temporary or contractual employees without any notice and not grant them any statutory benefits available to permanent employees. However, last June, policy think tank NITI Aayog vice-chairman Rajiv Kumar reassured citizens that laws would be reformed but there won’t be any hire & fire policy.

This article first appeared on Quartz.