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EXCLUSIVE-Hit by slowing growth and automation, IT industry has started sacking freshers

While not stark just yet, the numbers for fresher layoffs and lack of opportunities are beginning to speak for this phenomenon.

March 13, 2019 / 12:45 PM IST
Job loss | The pandemic has wreaked havoc on the job landscape in India. According the Centre for Monitoring Indian Economy (CMIE) about 21 million salaries employees lost their jobs during April-August. There were 86 million salaried jobs in India during 2019-20. In August 2020, the count was down to 65 million after 3.3 million jobs were gone in the particular month, mostly among the industrial workers and white collar workers, as per the CMIE. (Image: Shutterstock)

Job loss | The pandemic has wreaked havoc on the job landscape in India. According the Centre for Monitoring Indian Economy (CMIE) about 21 million salaries employees lost their jobs during April-August. There were 86 million salaried jobs in India during 2019-20. In August 2020, the count was down to 65 million after 3.3 million jobs were gone in the particular month, mostly among the industrial workers and white collar workers, as per the CMIE. (Image: Shutterstock)

 
 
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If you are a young software professional still flush with the excitement of being hired from campus a year or so ago and cherry-picked for training programmes, take a deep breath before you read this.

Anecdotal evidence shared with Moneycontrol suggests that companies are sacking youngsters within a year of having hired them as they get increasingly desperate to cut costs in the face of slowing growth and automation.

“I was a fresher. I joined Tech Mahindra in 2016 and was asked to leave in 2017 June. And I was trained in a technology which has demand in market. We were moving from our second base location when we got a call at the railway station from human resources, asking us to put in our papers,” said a former employee of Tech Mahindra, speaking on condition of anonymity.

“When we said we don’t have access to the internal system, we were asked to share our passwords with our friends in the company so they could file our resignations,” the person said.

Also read: 'IT to layoff up to 2 lakh engineers annually for next 3 yrs'

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Another employee asked to leave in a similar fashion detailed the harrowing experience he had with the same company, after going through a cycle of training in different skills and moving to more than two locations the same year. He was then asked to quit because they had not been allocated to any project. “Finally, we were helpless,” he said.

Tech Mahindra, which did not respond to an email request for a comment, is not the only company doing this.

Several freshers -- or fresh out-of-college recruits -- in the IT industry are being asked to leave by IT majors, even though they are considered the most adaptable to learning new skills, and are usually not paid very high salaries, helping companies keep costs low.

“Freshers are asked to leave companies without any notice. The most widely used approach by these companies is either putting them on technologies that are going to be redundant soon or posted at locations that were not same as promised while recruiting. During the training sessions, they are being continuously harassed and failed deliberately in the tests, thereby creating a hostile situation for the freshers,” said Y Kiran Chandra, founding member, Forum of IT Professionals.

“We have seen a growth of about 30 percent in fresher resumes this quarter, up from about 24 percent last quarter. Historical data suggests that between 3-5 percent of the people hired are laid off within a year due to their poor performance. We estimate that in the first half of this year, the percentage may have risen to almost 7 percent,” said Alka Dhingra, General Manager at IT staffing firm TeamLease.

Also read: As costs pinch, is Cognizant targeting some women employees?

At least two other industry experts who did not wish to be named conceded that fresher layoffs are a reality, with several IT companies having hired in excess for the year, and now shedding off people because of a lack of projects.

Have companies over-hired freshers?

Companies maintain that there is enough opportunity for those who are willing to learn new skills and show flexibility. Traditionally, industry experts have pointed out that the middle-level employees - those with 10-15 years of experience are the most likely to be laid off, but the increasing number of retrenchments, even at the lowest rung, is cause for worry.

Industry body National Association of Software and Services Companies (Nasscom) has said in the past that the industry “continues to be a net hirer with over 1.5 lakh people being employed on a net basis each year” though the focus is shifting from hiring in large numbers to skill-based hiring.

Also read: Fewer jobs, more layoffs: Why pace of hiring has slowed in Indian IT

The IT industry is coming to grips with a market shift from an arbitrage-first model to a digital-first model, said Peter Bendor-Samuel, CEO of consultancy Everest Group.

“First they (IT companies) were in denial about the slowing growth, now they don’t want to accept that the arbitrage first model shrank by 2.8 percent last quarter and they really don’t want to accept that the rate of shrinking will increase quarter by quarter as digital disrupts and cannibalizes the arbitrage legacy business. What this means is that in some cases they have over hired freshers, and have too many other employees even as they retrain employees for the new digital world,” he added.

Nasscom has said in the past that “workforce realignment” is linked to performance appraisal processes is a regular feature every year and no significant changes have been observed this year.

Industry going through churn

While not stark just yet, the numbers for fresher layoffs and lack of opportunities are beginning to speak for this phenomenon. According to data from TeamLease, the IT industry has projected job losses of over 60,000 people for this financial year because of technology shifts and rising protectionist sentiment in the US, Indian IT’s largest market.

IT companies are also looking to reduce their bench strength, and moving to a requirement-based or just-in-time hiring model.

Vivek Wadhwa, ‎Distinguished Fellow at Carnegie Mellon University College of Engineering and a vocal critic of India’s IT outsourcing model, said the industry was going through a churn “and things are going to get much worse”.

Bendor-Samuel agreed, adding that an absolute reduction in the number of people employed by IT, though expected, has not happened yet, even as margins are increasingly under more pressure.

“The effects you see now are the early tremors of a huge change which is coming. In this part of the cycle, they are dealing with over hiring and reshaping the talent model. In the next phase we will see more draconian steps taken,” he added.

Where are the opportunities?

“I have my career ahead of me. Most of us who were asked to leave come from small towns and cities and even though I have applied to several places, I haven’t got a call,” said one of the laid off employees mentioned above.

According to TeamLease’s Dhingra, “the market does not wear blinkers when it comes to good talent,” even though fresher hiring is likely to remain bleak for the remaining part of this year.

The newer opportunity areas such as artificial intelligence and sensors are a silver lining, said Wadhwa. “These graduates need to start learning about the technology advances and opportunities. They can build the new billion dollar companies—which replace today’s IT services companies as large employers,” he said.

The domestic Indian market offers several opportunities. “The good news is that this is growing. The bad news is that wages are much lower and that it may have trouble absorbing large quantities of workers in any given month so that some of these laid off workers may face a period of unemployment and the prospect of having to move cities to go where the work is,” said Bendor-Samuel.

Also read: Moneycontrol Impact - 'Quit by 10 am or get fired': Anand Mahindra apologises over manner of employee's sacking

Share your stories

At Moneycontrol, we've reported extensively on job layoffs that have taken place in the IT industry. Share your experiences with us. Given enough responses, we'll do a follow-up article.

Neha Alawadhi
TAGS: #Business #IT
first published: Aug 17, 2017 02:00 pm

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