How is it that when most of the Indian IT companies are laying off their employees, TCS is escaping from this?

This was an interesting question from an online forum. Another similar question that came up.

Rumours has it there are plans to layoff as many as 20,000 people from the company. As a result there has been a delay in the appraisal cycle as well. Seniors or any people well informed kindly shed some light into it.

To respond, let us start by looking at the basics:
  • The business model in the western /developed countries are much more ‘business friendly’ and many states in the US have "right to hire" or “employment at will” laws. What this means is simple: Employers can terminate employees “without cause,” just like employees can leave a job without giving a lengthy notice period. However, employees who are part of such involuntary termination can file for ‘unemployment benefits’ till they find another job.
  • Software service companies in India operate in the same global environments like their peers and are subject to the same market risks like restrictive visa and immigration rules, automation of manual tasks, etc. However, the law in India currently does not have “right to hire” clauses.
Indian software service companies generally do NOT resort to “layoffs” or shutdown entire business units and retrench people enmasse. By doing so, they will become subject to labor laws and other government regulations. What they do instead is the following:
  • Wait for natural attrition and slow-down hiring - The attrition in Indian IT has been in the 10–15 percent range
  • Instruct individual managers to seek the help of HR to initiate “Performance Improvement plan” for the bottom percentile of people.
  • For a large company like Infosys, TCS or Wipro, the ‘bottom 5–10 percent” of people will account for 10–20,000 people. Such a large number of people being “nudged out” becomes news; which the Indian media calls it ‘layoff’
What this means is simple: Ask yourself, has Cognizant, Infosys, or Wipro “announced” layoffs in India? No. Are they resorting to tactics to reduce headcount and minimize bench? Sure!

Bottomline: TCS may not be “escaping from” layoffs but may be resorting to other bench reduction “business practices” that don’t make headlines. 


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