Indian Union Budget for the next financial year (2020-21) will be presented to parliament on 1st Feb. All eyes are on the budget and different walks of people including farmers, salaried, unorganized workers, small organizations, large and giant organizations and common people are expecting what they will get as part of this budget. There is a huge expectation on this budget due to the following crisis:
- Indian GDP growth rate dropped to 10 year low which is really a big issue to be addressed immediately.
- Mid and small-cap indices of share markets are almost at 5 year low.
- The GST tax collection target is not achieved as per prediction. There are complaints from economists that GST is a failure model. Targets are nearly 30-40% lower as compared to the expected numbers.
- The buying capacity of people dropped considerably which affects many industries. Automobile,
construction and all the major industries which power the economy have taken a big hit. These industries generate demand in cement, steel, education sectors and provide employment to millions of workers in the organized and unorganized sector.
- Not only that. Even consumables are affected. Britannia which is the leading biscuit manufacturer in the country reported that customers are even thinking twice before buying Rs 5
product of their biscuit. This shows that there is a serious issue in the economy.
- The government announced relief for small, mid and large-cap companies by providing tax cuts for these organizations to boost their after-tax profit and to improve revenues. They were expected to invest more and boost the economy. But it did not yield satisfactory results.
So all eyes are on the coming union budget. On behalf of IT industry employees, we will explore our expectations from the perspective of an average employee.
- Tax slabs to be reduced yielding savings on income-tax.
- There is no major tax reduction for salaried employees in the last 5 years. There is a huge expectation that tax slabs will be reduced just as the government provided tax reduction to corporate companies
- The higher limit for declaration under 80CC and other tax-saving instruments.
- Higher deduction for interest on housing loans which boost the housing industry
These are the common expectations of any IT employee. But, in this article, we will have a deeper look at whether these changes will resolve the bigger problem of increasing the buying capacity of people. Let us have a look at some of the news reported in different magazines in the last 2 years. Later, we will deep dive into what impacts these events created in common IT employee life:
- Infosys could lay off as many as 12,000 people while Cognizant plans to cut 7,000 jobs (India Today dated Nov 05/2019)
- IT Giant IBM was planning to reassign 30% of its staff and in the process, letting more than 10,000 jobs to go (Times of India dated Jan 21, 2018)
- Verizon using bouncers to layoff a larger set of their employees. The open letter from Verizon to their employees are published in this link
- Cognizant to lay off 350 employees and cut costs
The above are just samples to understand what is happening in the IT industry. The numbers illustrated are just projected to the outside world, the actual number of people affected on these layoffs are much larger. People in mid and senior level who are above the age group of 35, are the major affected group in these layoffs.
I have published an article on Indian law about termination and later this was published as a book with the name of “IT Life – Fun or Problems”. This article explained that Indian law does not provide authority to companies to terminate employees based on their own policies without following legally stipulated termination procedures.
This article also discussed what will happen if Indian law provides such authority to corporate companies. Such a system will create the following impact on the Indian economy as described in that article:
“Next to agriculture wage labour is the most prevalent employment opportunity for working people in India. Agriculture is already in a deep crisis due to multiple levels of exploitation and corporate attacks”
- If the industry has the right to terminate employees with 2 months notice job security will not be there for any of the employees.
- Employees will not make any big financial decisions. They will not buy flats, cars, luxury items and it
badly affects demand in all these sectors
- People who got loans from the bank will not repay if they lose their job. It creates a big crisis for banks and
other financial sectors.
- The IT sector involves mental work and people with higher experience can perform better. But in manufacturing jobs where physical labor is needed, only young workers will be retained and all workers
older than 40 will be forced out of employment. (In IT also it is happening now)”
What was predicted in the article in 2017 has become reality now. With the deep freeze in hiring and unchecked firing, IT employees have gone into savings mode. They are not ready to commit to buying new houses or cars. As pointed out, the housing and automobile sector are the major engines powering the economy. With stagnation in these sectors, the whole economy is in deep stress.
I am in the IT industry for the last 23 years. I have seen the recessions that happened in the year 2001, 2007. During those recessions, people will be laid off during a particular time of the year. There is no major specific targeting of senior employees as the industry itself was young in that period. So even if people got fired, they get jobs easily. So they are not constrained financially in buying houses and paying EMIs regularly.
For example, in 2007, a company would conduct annual appraisal and managers are asked to identify bottom 5 or 10 performers. These low performers are sent out en masse at the end of the appraisal cycle. After this cycle is over, there will not be much threat for the remaining people until the next appraisal cycle. But for the last three years, IT companies are not planning layoffs during a specific period. Layoffs are happening throughout the year.
For example, Cognizant cut bench period to one month and if the employee did not get projects within one month, they will be terminated. So the knife is hanging all the time above your head and HR might call for final discussion at any point in time. This is the risk carried by all IT employees. As they are constantly facing this risk, naturally as explained by me in my articles, employees try to save most of their money during their time in employment. They don’t want to take any loans which affect the banking industry, adjust to living in a rental house that affects housing, use public transport or use cabs which affects the automobile industry and so on. That’s what is happening in the industry for the last 3 years.
The government is pouring oil to this burning issue like the introduction of fixed-term employment, the introduction of new labor codes, etc which is making the situation worse. So as part of the budget and subsequent measures from Government, we IT employees expect the following things:
- The statements by the corporate companies about layoffs are against law as they don’t follow legally specified retrenchment procedures. These companies also did not obtain any permission from the labour office to retrench employees. This is proved by the RTI campaign of our union, refer to this article about the details. So Govt should monitor these statements and take strict action against the companies who did not follow retrenchment procedures and terminated employees illegally.
- The government should support employees and remove their fear of unexpected and sudden layoffs. They should stand with the employees and support them against illegal retrenchments.
- Providing tax rebates will definitely help employees but more than that, the government should focus on fixing the root cause of the problem
IT employees are one of the large section employees who pay high taxes to the government. They also bring a lot of foreign exchange for our country, by their hard work. So the government should consider
their pain and come forward to support them. Corporates should also understand what impact these lay off are creating in the economy. I want to quote my article on what impact if code of law is implemented to corporates.
History teaches us its lesson repeatedly. If we see the history of 1926 labor union act, we understand the importance of labor unions. The increasing number of incidents like David and Ganta Chaitanya in the IT industry remind us of the effect it is going to create if unions do not exist. So the Government’s decision of diluting labor laws may act as a boomerang on corporates as well. This dilution is a sharp knife and the effect it is going to cause will not only affect employees but also corporates drastically.
History is a good teacher and I believe corporates should learn from past history and support unions and oppose this dilution. If it happens, it may create temporary benefits but in the long run, it will make the situation worse. This applies here directly. If the economy is going down, the business of corporates takes more hit rather than anyone. They have huge investments made in their businesses, if the buying capacity of the country drops, nobody can do their business well. In the interests of the employees, corporates, state revenue, and overall economy, the government should take steps to improve employment conditions. All labour laws should be preserved and their implementation should be strictly enforced.
- Shyam Sundar