A combination of slowing growth and increasing automation is compelling India’s IT sector to lay off employees in numbers not seen before. Experts say involuntary exits could continue in the course of the year. Top tier firms including Infosys and Cognizant are either letting go of employees, deferring salary hikes or trimming the variable part of compensation.
Cognizant is understood to have let go of some 2,000 people or approximately 2.3% of its workforce. Infosys is believed to be reducing its headcount by about 3,500 people or roughly 1.7%. The company has not confirmed the numbers but has indicated various measures are taken post the bi-annual appraisal.
Together, the top half a dozen firms could see lay-offs of close to 20,000 or higher, industry observers said. Currently, the IT industry employs close to 4 million people; typically, around 1% of the workforce is retrenched annually post assessments. However, this time around the vacancies may not be filled soon.
While a good chunk of those laid off could find work in smaller IT firms — or even in the e-commerce sector — it is a fact that the momentum in hiring is slowing down. One senior HR executive from a leading IT company admitted that this time it would not be easy for IT professionals to find another job.
The other difference in the lay-offs this year is that many of the employees are at the senior level. Infosys, for example, is believed to have let go of employees in the J6 level and above category doing the job of project managers and senior architects.
Similarly, Cognizant has introduced a voluntary separation package for director to senior vice-president level as these employees could not make the cut in terms of reskilling.The industry is now expected to grow in single digits with Nasscom projecting growth at sub-9% for the current year. Even the larger Indian IT services companies like Tata Consultancy Services (TCS), Infosys and Wipro reported growth at around 10% last year.
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As such, given that around 55-60% of costs are accounted for by salaries, IT firms are being compelled to trim their workforces. The employee pyramid of IT companies has the largest base of around 40-45% in the zero to five years experience but there is a significant bulge as it goes higher. It is in this segment that many companies are looking to reduce the flab. The slowdown in hiring started last year — Infosys, for example, made a net addition in employee headcount of just around 6,320 for FY17 as compared to 17,857 in FY16. Wipro too hired fewer people last year. Krishnamurthy Shankar, executive vice-president, group head, human resource development, Infosys, said recently, “With automation, the number of people we are hiring in the past will not be the same. It will slow down a little bit. We are also looking at hiring very differential kind of people.”