Coronavirus pandemic: Experts urge India Inc to avoid layoffs, pay cuts for faster recovery

In a report, UBS Securities said the increased risks of a global recession, mobility restrictions and social distancing measures are pushing India towards a “severe pandemic” scenario, with the country’s GDP growth expected to slow sharply in at least for the first two quarters of 2020.

With the coronavirus pandemic threatening a sharp economic slowdown, experts are suggesting companies to adopt a humane approach in rationalising their expenses without going for across-the-board pay cuts or freezing of hikes to ensure a faster recovery from the slump.

While contract employees in many sectors, especially those in the manufacturing space, are already losing their daily wages due to a lockdown of plants and various other commercial establishments, several companies are said to be planning pay cuts or at least freezing of hikes due from the next month.
However, experts are of the view that it is the time for India Inc to send across a long-lasting message and it is their duty to provide a sense of security to their workforce by retaining their existing staff members and that can be achieved as any fresh hiring is anyway unlikely to happen at the time.

There are several areas where expenses can be cut to ensure that staff costs are left untouched, experts said, while listing publicity budget among the “most unnecessary” expense heads in the current scenario. Besides, travel, hiring and training costs have as such gone down, they said.

In a report, UBS Securities said the increased risks of a global recession, mobility restrictions and social distancing measures are pushing India towards a “severe pandemic” scenario, with the country’s GDP growth expected to slow sharply in at least for the first two quarters of 2020.

“The challenge for India, compared to its peers, is starker if infections spread rapidly considering the higher density of population per capita and weaker health infrastructure,” it said. “The possible multi-week shutdown to slow the spread of COVID-19 will entail a near-term economic cost. Consumption will likely remain weaker for longer and possible job losses mean the recovery will be delayed,” said the report from UBS analysts.

In this scenario, several business consultants and HR experts said, companies need to be careful when it comes to rationalising expenses as job and pay cuts would further aggravate the problem by delaying the recovery.

Bradford Consultants LLP’s Managing Partner Aroon Kr Aggarwal said this is a unique situation for employers and employees equally, but organisations should take a sympathetic and rational view towards their staff.

Aggarwal suggested keeping communications channel active with the staff about the companies’ topline and bottomline for openness and transparency. For rationalisation of expenses, he suggested travel, variable pay/bonuses, training costs and said these cuts can save 5-6 per cent of HR costs which can be used to avoid pay cuts and even ensure a reasonable hike for the next fiscal.

Aggarwal said the coronavirus situation is already helping companies experiment with the work-from-home option and understand its impact on business efficiency and a faster adoption of latest technology tools can be a new normal.

Investment advisory firm Client Associates’ co-founder Rohit Sarin said all non-essential costs which can be classified as “nice to have and not must to have” should be deferred, which may include new hiring, marketing initiatives, internal and external events and travel.

However, operating costs are a subset of operating revenues and therefore the only sustainable solution is to get back to normal economic activities, he said. Juhie Sinha, founder of TalentART Partners, said it is important for companies to show they care and value their employees in these trying times.

Some measures that companies can take immediately after the situation improves is to use technology more effectively, minimising travel to essential ones, conducting training programmes online, having webinars instead of large events, etc, Sinha suggested.

Besides, companies can limit hiring to essential positions but with larger roles, while working hours can be increased for few weeks to maximise the productivity, she added. “People may welcome this, specially after tasting ‘joys’ of being home for so long. Another very vital idea would be to use executive consultants more effectively and creatively for hiring while the internal managers can focus on keeping employees motivated,” she said.

Anup Sharma, an independent consultant, said all industries will see a major overhaul in their business goals, organisations will be investing more in automation to reduce overheads and many of them will be investing in technology-led communications with greater use of social media and other digital platforms.
Neha Pant, Senior knowledge Advisor at the Society for Human Resource Management (SHRM), also said travel costs can be minimised, spending on training and entertainment can get restricted, while new hiring can be suspended, among various measures.

On possible layoffs and pay cuts, she said the services industry would be hit the hardest and without any economic incentive it will be hard to avoid downward revision to hiring and pay hikes. Pant said technology is a saviour in this time of social distancing and there could be an increased adoption of AI-powered tools due to the current crisis.

Actor and writer Shreya Narayan said companies need to limit the exposure of their employees’ to the virus infection by asking them to work from home, but they must be paid in full as it is the goodwill that will last.

“Delay hiring, but retain existing staff. Give them that security,” she said. She, however, warned that a faster adoption of AI tools due to this pandemic would only aggravate the human condition and the corporates need to decide which side of history they want to be on. Hero Future Energies’ HR head Bhawna Kirpal Mital said her organisation is focussing on maintaining a timely communication channel with employees and is also geared to provide them all necessary support.

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