News Highlight:
Global layoffs and its impact on India
Over the past two months, a slew of U.S. multinational companies, including tech giants Amazon, Meta, Intel, and Twitter and financial behemoths like Citi and Morgan Stanley, announced massive layoffs.
Key Takeaway:
According to a global placement and coaching firm, the layoffs crossed 60,000 in September and October. These developments are bound to have an impact on India’s export prospects, especially in the information technology (IT) sector.
Lay-Off:
- About:
- A layoff is the temporary or permanent termination of employment by an employer for reasons unrelated to the employee’s performance.
- Employees may be laid off when companies aim to cut costs due to a decline in demand for their products or services, seasonal closure, or during an economic downturn.
- When laid off, employees lose all wages and company benefits but qualify for unemployment insurance or compensation, Usually in the USA.
- Laid-off employees often do not lose their investment in company retirement plans and may be entitled to a severance package.
- The Labour bureau complies with layoffs in factories employing workers.
Common reasons why employees are laid off:
- Cost reduction: One of the main reasons why workers get laid off is because the company decides to cut back on costs in some way.
- Relocation: Moving the company’s operations from one area to another can also bring about the need to let go of some workers. Shutting down the initial location will affect not only the workers who get laid off but the surrounding community’s economy as well.
- Staffing redundancies: Layoffs also occur when a company needs to eliminate some positions due to overstaffing, outsourcing, or a modification to the roles. A company may want to eliminate redundant positions to make its operations more efficient.
- Merger or buyout: If a business is bought out or decides to merge with another, the change might lead to a change in the company’s leadership and corporate direction. If there’s new management, the chances are that they’ll come up with new goals and plans, which can lead to layoffs.
Effects of layoff:
- Employee layoffs can have devastating effects on both suspended or terminated employees and those who survived. Laid-off employees may exhibit shock, anger, distrust, doubt, frustration and escapism. Employee layoff, if not handled properly and carefully, may result in protests and disputes.
- Laying off employees can have a significant adverse effect on customer retention. Every customer is an asset to any company, and the employer must find ways to retain each. When a company lays off its employees, it sends out a message to customers that it is undergoing some sort of crisis.
Recent triggers of Lay-Off:
- Pandemic Boom
- Overhiring during pandemic
- Fear of recession
- Russia-Ukraine War
- Inflation
The lay-Offs scenario in India:
- The Indian IT services firms are among the largest employers in the organized sector, and any global economic trend is bound to impact their growth projections.
- Managements look at headcount numbers critically when they want to cut costs and protect profit margins as they are accountable to investors.
- The attrition rates, or the number of employees per 100 quitting on their own, of the top two firms, TCS and Infosys, show that these rates are still high, which means that there is enough business for the sector for competitors to draw away employees with the promise of higher salaries.
- Among the startups that have laid off people, ten startups were from the e-commerce industry, while seven startups were from edtech. Of these startups, seven, to be specific, were unicorns—Ola, Byju’s, Unacademy, Vedantu, Cars24 and Mobile Premier League (MPL).
- Another unicorn, Blinkit, formerly known as Grofers, fired people when it was a unicorn but lost its unicorn status during its acquisition by Zomato.
Way Forward:
Voluntary retirement programs, cutting back on the extras, Offer more unpaid time off are some of the alternatives to reduce the layoff stress on employers. Companies should focus on ethical issues by involving and balancing the interests of the two important stakeholders – investors and employees, Corporate governance and business ethics, responsibility, empathy etc.
Pic Courtesy: The Hindu
Content Source: The Hindu