Mass Retrenchments in IT Sector

IN December 2014, the employees of IT industry in Chennai and India challenged a decision of mass retrenchment. They held a demonstration and submitted a petition to the Labour Commissioner for reconciliation between management and employees. This protest broke the myth that IT workers who are relatively higher paid can never unionise and mobilise. The initiative soon spread into other cities - Pune, Bangalore, Mumbai, Kolkata, Hyderabad, and Bhubaneswar. Petitions have been filed for IT and ITES employee related to retrenchments in Wipro, CTS, JP Morgan, IBM and other big and medium sized companies. In a few cases employees were reinstated. The most notable and lasting achievement was the formation of different IT employee associations in Chennai and Bangalore, which subsequently forced the government to accept the registration of IT unions in those cities.

The total direct employment in IT/ITES industries is around 4 million, while indirect employment is more than 1 crore. Not counted in this calculation is the indirect employment in the form of accountants, security guards, construction workers and jobs created by other industries around this industry. Most of them are temporary and contractual.

4 million jobs, although a very small percentage as compared to the overall workforce of country, is still considerable. A section of this 4 million-strong workforce is contractual from very beginning. As compared to the year 2001 the workforce has increased in IT and ITES (BPM) industry. As per the statistics published by NASDAQ in May 2017, in 2001 the total employment was 4.30 lakhs where in 2017 it is 3.86 million. The same statistics revealed that in the year 2017 around 56000 employee were retrenched in India. In reality the retrenchment is part of private owned industry to maintain and increase profit, and the phenomenon is global.

In one of biggest layoffs around the world, IBM has retrenched 60000 employee in 1993 mostly in U.S due to its mainframe business shutting down. Following the same trend post collapse of World Trade Centre, lakhs were illegally retrenched, a huge section of which was in India. India IT and ITES sector are hugely dependent on outsourcing by US and European firms. This sector offers the advantage of 5-6 times lower cost compared to U.S - and this was the reason for its initial growth and employment. The Trump phenomenon, cutting down H1B visas adds fuel to the crisis in India IT, but it was not the main cause. The revenue of India’s IT industry reached US$ 181 billion and exports stood at US$ 137 billion in 2018-19 in spite of the actions of Donald Trump. But the mass retrenchment or layoffs continue.

As per economic times dated 15th May, IBM has sacked 300 employees in India in software services. The reason given by Management is as followed:  there has been a reassessment of skill sets at IBM’s India offices and the company has been increasingly seeking to add talent in cloud, artificial intelligence and others emerging areas. As per news published in Economic Times and our internal sources in Cognizant, Cognizant is also planning to fire a section of employees citing the same reasons as IBM.

Every year in the name of performance appraisal, several non-performers are retrenched, however when mass retrenchment occurs, the reason is not performance but the company’s inability to achieve its expected level of profits, or its wish to use layoffs to make profits. Shrinking the labour force is the easiest choice, since the owners and management know that the government will not intervene in this process and will take side of the companies.

India has several IT parks and the government has declared the big IT parks to be SEZs. In the big IT parks, plenty of food, gym facilities etc are provided. If we compare with the pathetic conditions of workers employed in manufacturing or garment sectors, IT sector workers appear much better off. But the rosy picture cannot overshadow the thorns – in spite of getting higher salaries, IT workers suffer from tremendous job insecurity. A small handful go to the top managerial positions, but mostly employees stagnate after 15 years. The experience of retrenchment in the last 2-3 years shows that mostly mid-level employees with 8-15 years’ experience are targeted. After retrenchment, any employment that such employees manage to find tend to be far below expectations.

The situation in ITES (BPM) is even worse, since BPO workers join with much lesser salary as compared to IT and increments happen very slowly (This is same situation in most of the IT companies). A prominent BPO Concentrix pays freshers Rs 11000 and a reputed BPO like HSBA pays Rs 15000 whereas after 15-16 years of consistent experience and performance, the salary may reach Ra 50000 and then stagnate. The workers in the BPOs are generally called agents. Over 80% of BPO workers are in the age group of 20-25 years. Women workers (mostly unmarried) roughly constitute 40-50% of the workforce. Workers are generally recruited as probationers for 6-12 months. Only a very small portion of these probationers are absorbed as regular workers. Studies have reported that as high as 38% workers in BPOs are probationers (workers on probation for up to one year before being formally hired as regular workers) or on project-based engagement (only 62% are permanent workers). Moreover BPO workers, whether regular or temporary, do not get any leave on all national holidays and festivals. The issue of leaves is so crucial that sometimes it becomes a reason to resign. The workers are always under psychological pressure. It is to be noted that industrial labor laws are not applicable to this IT and ITES industry and all shades of government always side with entrepreneurs in this regard.

The NASDAQ article cited earlier predicted that by the year 2025 the total employment in IT industry will rise up to approximate 7 million thanks to digitalisation, artificial intelligence, cloud etc. The same article writes ‘Experts say there is a bleak future for sacked employees’. The NASDAQ estimate is probably based on today’s workforce (around 4 million) out of which a large portion will be retrenched in the next 2 years, which is not taken into account. There will be some jobs created due to AI, Cloud, and digitalisation, however only a handful of them will be highly skilled. The work conditions in ITES (BPO) sector will continue to be the same and insecurities in IT industry will increase.

Our present day economy is like this. Jobless growth is reality, job insecurity becomes part of everyday’s life. But how to organise and what are the challenges to organise?

Challenges for Organising the IT, BPO Workers

The working conditions and management practices in the BPOs promote individualism and act against development of collective solidarity among the workers. By using ACD technology along with standard scripts for response to calls, the management actually leaves no time for interaction among workers. For every second in the shift, every individual cares for completing his target only, since the salary and other benefits and also the job security depends on completing the targets. For getting a better place in a five-point rating system, all the workers are compelled to compete with each other, rather than to cooperate. Moreover as compared to manufacturing or garment workers, employees in this sector get the illusion of treatment like management (without a salary to match!) - sitting in AC rooms, good transport facilities, designations like assistant manager, manager etc.

The IT industry workers on the other hand enjoy a relatively fat salary and some time ago, IT workers could imagine themselves to be the real executives who rule the world. However mass retrenchment changed that scenario and has brought home the need to organise and struggle to many. The registration of unions in Chennai and Bangalore following struggles are testimony to this.

The Indian IT industries were exempted from the Industrial Employment Standing Orders Act, 1946, which means unlike factory workers the disputes between employer and employee cannot be dealt as per labour laws. The labour laws have been further reformed in favour of owners under the present regime headed by Narendra Modi. Thee is a need for stronger unions in the IT and ITES sector to effectively resist mass retrenchment and pay cuts.

The following demands are being raised by unions in these sectors:

  • Raise the minimum wage which will be useful for contract employees in IT and all employee in ITES sectors
  • Instead of contract-based work make all jobs permanent
  • No illegal retrenchment or forced termination without complying with the law.
  • Registration of unions in IT and ITES sector need to be accepted.
  • Stop all exemptions to the IT Sector and ensure compliance with the Industrial Employment Standing Orders Act
  • Implement labour laws in IT and ITES industry. 

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