Layoffs have become common in most sectors of the world amidst the global recession. But what makes layoffs common? Alphabet’s CEO Sundar Pichai warned the people of an early winter in the tech sector earlier this year. When he was asked about the layoffs in the workforce during the meeting conducted in September, he replied that we do not usually get to choose the macroeconomic condition always.
A potential global recession can come as a big red flag. Inflation has been asserting its dominance in many regions, the central banks are tightening the policies to cope with the inflation and the increasing rates of consumption. Borrowing has become expensive, and consumption has been hit hard.
The current scenario will eventually affect economic growth and jobs. The International Monetary Fund has previously stated the global GDP growth for 2022 and 2023 to be gloomy because of the pandemic and the Russia-Ukraine war.
The current situation of the economy has outnumbered the financial situation that took place in 2008. This has been estimated for the calendar, and the data by the IMF shows the weakest since 2001.
The U.S. CEOs have expressed uncertainty about the situation in the coming months. The Conference Board Measure of CEO confidence shows most uncertainly than what was speculated in the 2007-2009 recession.
The survey was carried out among 136 CEOs asking what economic conditions they are preparing for in the upcoming months.
A majority comprising 98 percent of the headcount has mentioned that they are buckling up for the U.S. recession, while 99 percent have mentioned that they were preparing for the EU recession.
But, the main question is how the layoffs will affect the Indian IT sector.
The Indian IT sector is one of the largest employers in the world in the organized sector, and any global economic trend will have a significant consequence on its growth projections. The most integral aspect considered by the management when they decide to cut costs is to reduce the headcounts and protect the profit margins as they are accountable to the investors.
Though the symptoms are not certain, however, there have been some flags that could indicate how will India be affected by the global layoffs.
All top companies except Wipro experienced an increase in revenue and net profits. Wipro’s net profits declined by 9 percent earlier from the quarter that ended in September.
The attrition rate i.e., the number of employees quitting on their own will has been found t be higher in the two MNCs Infosys and TCS.
It implies that there are enough businesses in these sectors for the competitors to attract employees with the promise of increased compensation. Infosys recorded a decline in the attrition rate marginally by 27.1 percent in July-September 2022 as compared to 28.4 percent as observed in the April to June quarter.
On the other hand, TCS recorded an increase in attrition rate from 21.5 percent in July to 19.7 percent in June and September.
In terms of the Operating Profit Margins, Infosys has experienced an increase in its OPM to 21.5 percent in July-September compared to 20 percent in April-June. But the OPMs have significantly declined than the previous year.
TCS has experienced a rise in the OPM by 24 percent in the three months that ended in September compared to the last quarter accounting for 23.1 percent.
Valid sources have stated that Infosys is likely to pay out 65 percent of the variable pay to employees for the July-September quarter compared to what was offered in the previous quarters.
Are the layoffs equally worrisome for the Indian tech industry?
The EDtech sector has seen many layoffs this year. This has been because the lesser number of internet users visiting educational websites has declined due to the normalization of the covid-19 pandemic.
Sources state that around 15700 employees had been laid off in 2022 because of the tightening funding environment.
Byju’s, Unacademy, Vedantu, Ola, and many other prominent companies had made it to the news for layoffs.
Looking at India’s history of layoffs, it is safe to conclude that companies tend to remove employees who are at the bottom of the performance ladder. In other cases, if the person is found to be performing poorly, he or she is advised to take some training programs.
If the person who has been kept on the bench is not able to land himself in a project, the company will have to hand in the pink slip.
The 2008 recession showed how the companies slowed down their headcounts for a while. Planned additions from the campus would decline or offers would be made by the absorption in the company would take several months.