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Layoffs on the rise: Companies cut costs amid economic uncertainty

The Indian IT sector is facing scrutiny after reports of layoffs at Infosys and Wipro. Infosys recently terminated the employment of 600 freshers after they failed an internal assessment exam, and rumors suggest that hundreds of offered positions at other major IT firms have not yet been hired. These events highlight the vulnerability of the otherwise robust Indian IT industry to job losses.



On ET Now, the CEO of Teamlease Digital, Sunil Chemmankotil, discusses big tech layoffs. The Indian IT industry's reaction to these round-off layoffs began to emerge.

What do you think of the recent news reports stating that people who have already been hired will be rigorously evaluated for what they bring to the table?

There have been numerous layoffs due to macroeconomic and geopolitical problems. But, what we observe in the present situation is that there was a lot of hiring in the past 12 months. We specifically looked at the number of individuals hired between the ages of 5 and 12 and discovered a sizable number of individuals who were employed. This portion is made up of about 73% of the middle management layer, where we have paid astronomically high compensation.

There was obviously no other choice because of the talent work, and that was, of course, what needed to be done at that time. The IT industry is currently facing cost pressure, so some actions have to be taken. Therefore, a lot of layoffs are taking place, and it is evident that this is close to the appraisal period. We believe that the increases will likely be somewhat dampened, if not entirely muted, and that since the higher-paid staff are responsible for the results, they will all be subject to more scrutiny. Keep in mind that they are incredibly talented and skilled individuals, so it is important not to take their dismissal lightly. They should be maintained, and a coarse adjustment should be made as we move forward because there is still a natural addition during this course correction.

What do you think of the most recent discoveries regarding a sizable IT company that tested its freshers and fired 600 of them when they failed?

Now, there is a cost pressure. There will be scrutiny at every level. The entire talent management pyramid, whether you call it the freshers or the middle manager, I was particularly referring to the middle team, but even in the pyramid, they have rolled out a lot of offers, and in some cases, they don't have enough business coming through, so they are waiting for the previous batch of freshers to be productive. So I'm sure that those steps are one of the steps, but there will be further steps that can be taken at various stages of talent acquisition.

What do you think the upcoming steps will entail?

We have already heard reports of individuals who have offered letters in hand but have not yet been fully onboarded. There may be a slight delay in onboarding and more scrutiny of both middle management and freshers. So, it sounds like a really all-encompassing strategy to reduce the flab.

Of course, there is a lot of volatility, and the quickest way to save money aside from discretionary spends is to cut people's costs, as these IT organisations now have a large workforce and a large wage bill. So, wherever they can scrutinise and take steps, it will be taken, and it's normal, you know, that this kind of scrutiny and cost-cutting measures keep coming in whenever the markets go down, and particularly in this kind of market, they are left with no other option. If the market had been good and wages were higher, they could have passed it on to their end customers by getting a better deal or a better margin. But, in these market conditions, we are aware that we won't get a better deal, so they have to make some internal cost corrections.

Do you see this trend reversing as quickly? The hiring and overhiring trend was reversed in a matter of six months, and IT companies went from rapidly building bench strength and dealing with a talent war to now cutting corners. So do you think this is a situation that can also reverse fairly quickly?

IT has always been cyclical; we must remember that, despite the ups and downs, it is an industry that has given a 7% compound annual growth rate (CAGR) over time and will continue to do so. Well, we hope things do improve for the IT space. Meanwhile, this is one fresh hiccup that seems to be in place as far as IT hiring is concerned. But remember, it's not mass layoffs like we're seeing in other new economy spaces. The bulk of Indian IT companies are just being a little more careful. The scrutiny of what the employees are bringing to the table has increased.

(Source: ET Now)

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