IT and Industries Minister K.T. Rama Rao’s recent appeal to industry leaders not to resort to layoffs has evoked mixed response. However, industry bigwigs are exploring various possibilities on how to tackle the situation.
The appeal by the Minister on behalf of the government gave some hope to employees in the private sector, particularly IT/ITES companies, who are fearing job losses, even while the company managements facing challenges due to the COVID-19 crisis and lockdown are assessing the impact on their balance sheets.
Hyderabad Software Enterprises Association (HYSEA) president Murali Bollu said that it was very nice of the IT Minister to make such an appeal as it can make people think twice and explore other options before opting for the last resort of laying off employees.
Big companies and companies with deep pockets to reach out to may hold back any proposed layoffs for the next couple of months for various reasons.
There was short supply of skilled professionals even before the outbreak resulting in spike in recruitment. But if companies let go of some employees because of the current difficult situation, they may not get back people of required skills later, he said.
Generally, the attrition rate in IT/ITES companies is between 18 and 25% and in addition, if companies lay off more people because of the present crisis, the situation may become unsustainable for some companies. Moreover for big companies, the contracts are for three to five years. Their problem however may be in securing new project contracts.
However, Mr. Murali said that for small and medium enterprises, it may be tough to not to resort to downsizing as they have to pay rentals even if employees are working from home. There is no US-like payroll protection and SMEs generally have one year or less than one year contracts unless they have clients from domains like insurance, health, and education.
In fact technology companies that were catering to domains like hospitality, tourism, airlines, entertainment, ticket booking were already impacted as their client sectors have been hit by COVID crisis and few such IT companies indeed started giving termination notices to their workforce.
The companies have two choices - across the board pay cuts or lay off some employees.
“This is also performance appraisal time. One may reduce the pay increase but at the cost of losing some good performers,” he said.
Even if the SMEs are compelled to layoff some employees, it will not be more than 1 to 2% of the overall IT workforce, he said.
The IT and ITES sector is also considering taking legal advice on how it should go about if it resorted to pay cuts, deferments and other cost cutting measures in a way that will be fair to all stakeholders and scheduled a meeting with legal experts.
