Sruthi Krishnan and Priscilla Jebaraj

Most tech companies have put a near-freeze on recruitment

CHENNAI: Chandrasekhar* had just come back to Chennai from his on-site assignment in Europe last week when he heard that several colleagues were being asked to resign. The domain consultant, employed by one of India’s top IT companies, was discussing the news with a friend over phone when he was called into his boss’ office.

“I did not know that I was going to be sacked,” he says. “I was just told that ‘You are not fitting our requirement. Why don’t you put in papers by tomorrow evening?’”

Rather than issuing the dreaded pink slips which can turn into a public relations fiasco, his company is forcing employees to resign citing a variety of “flimsy” reasons, says Mr. Chandrasekhar, who was lucky enough to find a new job.

At another of the IT majors, at least 12 employees were forced to resign at one go two weeks ago. Those with families in Chennai were asked to transfer immediately to a remote location, while another with a health problem was moved to the night shift with immediate effect. Faced with such “arm-twisting”, they had no option but to quit, says a colleague. Even project managers were not exempt.

While few companies are letting go of experienced employees, youngsters are more vulnerable. In a mid-size product company in Bangalore two weeks ago, Mohan*, an analyst, was surprised to find that an intern who had been working nearby for three months had disappeared.

He found that the offer to all freshly inducted interns in his company had been abruptly withdrawn.

Most tech companies have put a near-freeze on recruitment and have delayed induction of those placed over the last year. Discretionary recruitment by managers has been stopped, and now the top brass has to approve.

Pink slips are also becoming more common for non-performers, as IT majors tighten their standards. “Getting rid of the bottom five per cent every year used to be known as the GE way,” says K. Pandia Rajan, managing director of HR services firm Ma Foi. He says this Jack Welch mantra is being adopted by an increasing number of Indian companies over the last two to three months. Bench strength has fallen, along with the lax time allotted to training. Shadow resources, those on a project team who are not billed to the client, have also been reduced, as companies extract maximum performance from existing human resources, he says.

“Unless the government comes out with a suitable policy intervention, there will definitely be job cuts, mostly in the IT and ITES sectors… I expect 15 to 20 per cent cuts over the next year and a half,” says D. K. Srivastava, director of the Madras School of Economics. Both NASSCOM and the Confederation of Indian Industry estimate that there will only be a drop in the job creation rate, rather than a net fall in jobs, but that is little consolation for employees or the companies forced to fire them.

With rumours of job losses swirling around the IT sector, there are fears that the bleak scenario in the U.S. job market is just a few steps away.

Ishwar*, who was working as a consultant in Seattle, was scrambling to find a job after Microsoft decided not to renew his contract. With no salary and faced with the grace period on his visa fast expiring, he was prepared for any kind of job, but nothing seemed to be working out. He was almost ready to come back to India when he landed a job.

“It is sad and bad,” says Anshu Gupta, a first-year MBA student at a university in North Carolina. “First-year students are worried about internships and second-year students are bothered about placements. All potential bankers are switching to management consulting and there is super tough competition for prospective consultants,” she says.

Anand* lost his job at an insurance major in Connecticut. Shifting locations to find a job was compounded by the mortgage on his house. To sell would mean to accept a lower price for his property.

That kind of domino effect could be in store in India as well.

“Home loans have been affected to a certain extent. Those who look at it as an investment proposal are going slow in the current scenario,” says D.V. Prakash, senior manager of the Central Bank of India.

If the situation worsens, even those looking for a loan to buy their own home may be affected. Bankers also expect more EMI and credit card payment defaulters, especially from IT sector employees and several banks have already tightened credit limits.

“Loan demand is getting affected both by the job scenario and by high interest rates,” says Dr. Srivastava. Job cuts, lower salaries and higher fuel costs will hurt purchasing power.

The consumer appliances sector will also be hard-hit, as people postpone the purchase of consumer durables, he said. With companies cutting down on overheads and non-essential expenses, the travel and hospitality sector could also be affected.

*Names changed on request