IT Industry Layoffs: Decrypting The Why's And How's Of It All

After a one-month training at the company campus Infosys Technologies in Mysore, Wasi returned home and was put on the bench. In the Information Technology (IT) industry, employees that aren't assigned to any particular project are proverbially ‘put on the bench.’ They do, however, remain on the rolls and receive a salary like other employees.

Wasi was not assigned to any project and remained on the bench for the next eight months before Infosys HR informed her of a paperwork discrepancy. They cited her lower Class 12 marks as grounds for her job termination, despite Wasi claiming her hiring manager knew about her grades during the interview.

The Secretariat reached out to Infosys management for a comment. This story will be updated as and when a reply is received.

Layoffs: The Why And How

Wasi’s story, though somewhat unique in the history of corporate layoffs, is not new. Through 2022 and 2023, more than 36,000 individuals faced layoffs in the US$200 billion revenue-churning Indian IT industry (projected to touch the US$350 billion mark by 2025 end). Layoffs in the IT industry aren’t endemic to India, with more than 32,000 tech employees having been laid off in the first few months of 2024 alone globally.

“It’s the worst thing to be laid off. It creates a lot more challenges in your own head, especially in terms of how you view yourself as an employee,” said Ishan Russell, founder and CEO of Ldrx.ai, an AI startup, which helps create customised social media management platforms.

In each of the 'big three'  -- Tata Consultancy Services, Infosys Technologies, and Wipro -- the number of employees in recent years peaked in 2022-23 before declining in 2023-24.

The decrease in total workforce numbers at companies like Infosys and Wipro reflects a potential trend towards downsizing or optimization within the industry.

In India, there is consensus within the IT industry that the layoffs and voluntary exits were due to economic reasons; because the companies over-hired during the pandemic years. 

“I think, as an industry, that all of us over-hired at a point of time in this post-COVID period. So, we just want to be more cautious, more judicious as we move forward,” said Saurabh Govil, Chief Human Resource Officer at Wipro during the company’s Q4 earnings call in April 2024.

This comes after Wipro made offers to freshers in a post-Covid hiring spree but didn’t on-board them. It looks like they are focusing more on deploying its benched staff first.

During the hiring spree, Wipro added 55,256 more to its workforce between 2021- 2023. Wipro concluded 2023-24 with 234,054 employees, a decrease of 22,867 from the previous year. 

Now amid the demand-supply mismatch in the jobs market and volatility in share prices, the bottom line is that the Covid e-commerce boom didn't continue post-covid.

However, Wipro said that with a strong supply side, the company is confident that it can quickly scale up to meet increased demand when it arises.

TCS, which is one of the largest job creators in IT services for both freshers and lateral hires, too has seen a downward trend in hiring over the last one year.

“We have commenced fresher hiring from campuses and continue to recalibrate our lateral hiring focusing more on utilising the capacity that we have built over the previous years,” said Milind Lakkad, TCS’ Chief HR Officer, at the company’s conference call in April.

Automation engineers, speaking on conditions of anonymity, claimed that a lot of employee exits the industry saw during the last year have been due to below-expectation annual increments.

TCS itself has been bullish on employees opting for work-from-home. However, in a recent move, after its fourth quarter result, TCS introduced an updated policy which ties an employee’s attendance directly with their variable pay. 

The policy introduces four attendance slabs determining variable pay, with full pay awarded only to those with office attendance exceeding 85 per cent.

Paradoxically, Infosys, which has witnessed a decrease in total employees, has also reported  a declining attrition rate. This may suggest that the company is focused on retaining its existing talent rather than aggressively hiring or expanding its workforce. 

The company has also not decided on the campus hiring numbers at this point. 

“So, we no more hire all the freshers from campus. We hire less than half of them from campus and the rest we hire off- campuses,” said Jayesh Sanghrajka, Chief Financial Officer of Infosys, during the company’s Q4-FY24 press conference held last month. “We will look at hiring as the year goes through. We do not have a number to give at this point in time.”

The future of tech hiring, consequently, remains uncertain at this juncture. As per the IT apex body NASSCOM, the industry created 60,000 new jobs in the financial year 2023-24, as opposed to the 2.7 lakh jobs created in 2022-23.

Is the lay-off bloodbath over? Employees are still worried that they would lose their jobs. “There’s no telling how the job market evolves eventually. But it certainly is in a flux right now. It’s advisable to keep your head down, upskill yourself and become more efficient,” added Russell.

“Yes, there is a fear of losing jobs in the tech industry since 2022. The fear is even more among leadership than among people in junior to mid-senior level. Don't see it going away anytime soon,” said a PayPal software engineer.

The (Lack Of) AI Factor 

Pat of the apprehension about jobs, stems from fear of displacement due to automation. The top three IT firms have confirmed in their forward-looking statements that their companies will adopt task automation. In fact, IT companies are more focused than ever now to build an AI-ready workforce.

The experts we spoke to agreed that the artificial intelligence (AI) boom didn’t have a role to play as yet in job cuts. Not in India, at least. However, in the US, since May 2023, 5,430 job cuts have been due to AI, either because the companies were pivoting to developing it or because it replaced tasks and roles, according to Challenger, Gray & Christmas Inc.

“Hiring might slow down because of AI. But companies won’t fire people because of AI,” said Sudhanshu Saxena, consultant and trainer who conducts AI and genAI corporate workshops for Big Tech companies.

India has seen a hiring uptick in AI-related roles in the last two years. In the latest Naukri JobSpeak Report for 2024, hiring for specialised AI roles like Machine Learning Engineer and Full Stack AI Scientist soared by 46 per cent and 23 per cent respectively compared to the previous year. 

Even traditional AI roles such as Data Scientist have seen a strong demand. However, overall IT job growth was modest, with just a 1 per cent increase in January 2024 compared to the previous month. Year-on-year, the IT sector's hiring is down by 19 per cent compared to the booming times of January 2023.

AI has clearly become a darling of the job market in January 2024. Payal Goyal, Chief Business Officer of Naukri.com, said in the report that the significant rise in AI related jobs is indicative of the changing skill requirements in the IT sector.

As per LinkedIn’s Future of Work report released in November 2023, applications to AI and AI-related job postings in India saw a 5 per cent growth from December 2022 to September 2023. 

In fact, the chief product officer at LinkedIn said that more than half of the jobs in India will be affected by AI and that Indian professionals are using AI skills more than anywhere else in the world.

Both reports point towards a surge in demand for specialised AI roles, underscoring the industry's evolving skill requirements and a shift in the job market landscape. 

As we navigate the complexities of AI's impact on employment, it's essential to recognize its dual nature: while it may lead to job displacement in some sectors, it also presents new avenues for innovation and growth. With India emerging as a hub for AI talent and expertise, the future of work in the country is poised for transformation.