IT Companies turning into Unorganized sector – What is in for employees?

Before going into success stories, I want to bring to the reader’s attention a  dangerous policy a few companies are imposing at this time of Corona pandemic. I definitely feel, if this policy is widely used in the future, an IT job is going to be the most unsecured job in the world.

We will try to understand what a job in the unorganized sector means?

We will take the construction business as an example to understand how unorganized sector work. In the construction business, the company brings cheap migrant workers from different parts of the country. For example, a skilled mason from Uttar Pradesh, Bihar, or other northern states will be working in construction sites in states like Tamil Nadu.

These companies pay daily wages to these workers. If mason worked six days a week, he will be paid for six days. If work is stopped for various reasons like rain or health issues of a particular mason or any other technical, financial issues faced by the company, the mason will not get work and he will not be paid anything.

During the Corona pandemic, when all construction work stopped, construction companies did not pay anything to migrant workers. This resulted in job loss for all people involved in such unorganized sectors. Our country has seen several lakhs of migrant workers walk several thousand kilometers to their native places as they don’t have work. The reason for this severe crisis is the basic model of unorganized sectors.

A few decades ago, factories used to get people to work from the unorganized sector. The major advantage of the unorganized sector is the company uses manpower only when there is work. In old movies, we have seen rich factory owners throwing tokens for work from their balconies. We have seen how thousands of workers waiting for jobs fight with each other to get tokens and the only person who got tokens will be provided work.

In the unorganized sector, there is no need for the company to follow any of the labor laws. Companies are not required to pay any of the retirement benefits like provident fund, gratuity, etc. They can use the unemployment crisis and pick the best people paying low wages. Companies don’t take workers above the age of 40 in factories. They prefer younger people as they can work better with lesser wages.

As a part of their business model for Corona induced crisis, IT companies are implementing policies that make the organized IT sector into an unorganized form.

Tata Technologies brought such policies first into the IT sector. As per the Economics Time article dated Jul 24,  it introduced a new policy that asked employees to go on forced leave till the end of the year 2020. ( for the period of 4 to 5months). As per the report, Tata Technologies asked nearly 400 employees to go on loss of pay.

The company sent a mail to all its employees who are kept on the bench for over a period of 2 months. The copy of the email from Tata Technologies to its employees is attached for the readers to understand the policy better.

As per this mail, employees are provided with only two choices. They have to either accept this offer or if the employee is rejecting this offer, the company may terminate the employee.

We will have a closer look at this policy and see what benefit the policy is going to give to an employee who accepts this offer. The employee will be given medical benefits during this period. Gratuity will be accrued during this period. In addition, the employee will be shown as still employed with the current company.

What is the cost implication for the company per employee if any employee accepts the offer? Gratuity will be paid only if the employee worked in the same company for more than 5 years. If an employee does not complete 5 years in the current organization, the company is not entitled to pay anything to the employee.

In the IT field, people will be frequently switching jobs and on average only 50% of the employees will be working for more than 5 years in the same organization. As I mentioned earlier, I worked in the current organization for more than 18 years.

The final gratuity amount I will be getting as a part of my settlement will be 3,60,000 rupees. This translates to 20,000 rupees per year per employee. As 50% of employees are not eligible due to the fact of not completing five years’ service in the company, the company will be paying only 10,000 rupees per year, per employee. This translates to 10,000 rupees per year per employee for gratuity as the cost to the company.

In addition, companies are providing medical benefits to the employees who are asked to go on leave. Medical insurance is provided in the range of 3,00,000 to 5,00,000 rupees for the employees. All the leading Insurance Companies are providing Mediclaim insurance at a reasonable cost. The cost of such insurance will be Rs 10,000 for individual and around Rs 15,000 for a family floater insurance.

If an employee having a family of husband, wife with 2 kids, they can get the same medical coverage the company is providing at the cost of Rs 15,000. Employees who are single will get a policy at a cost of Rs 10,000. In this case, the cost to the company will be in the range of 10,000 to 15,000 rupees.

In reality, it will work out even cheaper as the company takes group insurance policy for all its employees and they will be getting good corporate discounts. So the maximum cost to the company for medical protection will be another 10,000 rupees.

Hence, If an employee opted for this policy, the company will be spending 20,000 rupees per year for both insurance and gratuity i.e. 1600 rupees per month per employee.

In the unorganized sector, if the migrant workers are not given any job, the manpower agencies which took the migrant workers for work will pay a very minimal cost for ration food. Migrant workers will be buying rice (or wheat flour) and vegetables with this money and they make life.

But in the case of the IT sector, they are not even paying for ration food. These IT employees are not paid anything in hand. Gratuity will be paid only after the resignation or termination of employees. As we explained, only 50% of employees will be qualified to receive this also. The company will pay only for the medical emergency. There will be no minimum wages, provident fund, or any other benefits paid to the employees. As this is the pandemic time, the company is projecting in such a way that they care for the medical aid of the employee and that is the reason this benefit is provided to the Employees.

If an employee accepts this condition and goes on 3 months unpaid leave, will the company guarantee employment for employees after 3 months? In reality, there is no such guarantee provided to the employees who accept this policy. In fact mail from Tata Technologies states very clearly that if the employee did not get projects, the company may take disciplinary action which includes termination of employment.

The government of India is mandating companies not to terminate any employees during this pandemic time. This policy is a trap for the employees. The company will place employees under no pay option and show the outside world that there are no layoffs in their companies.

Some of the employees who are placed in this policy will try to find another job and they leave if they got it. The company also will extend this loss of pay option for more months (say another 3 months or 6 months) as the cost incurred by the company is only 1600 per employee per month. When the pandemic situation improves, many of the employees will be shown exit door slowly and steadily.

My HR officer asked me to go on leave as part of this policy and I refused bluntly this offer as I know the significance of this policy. I got a call from HR officer on Monday and I was given my termination on Friday. I will talk about my experience of my termination in the later part which will make this series more interesting.

Our fellow IT employee’s union National Information Technology Employees Senate (NITES) has complained with the Pune Labour Commissioner in Wakdewadi in this regard.

“The company has violated the Maharashtra state Government’s directions, rules, and regulations issued on March 31, 2020. The employees have received communication from HR regarding immediate resignation or six months of furlough (leave without pay). The employees are under huge pressure and trauma as they are struggling to find new jobs under lockdown,” as per the statement of Harpreet Saluja, General Secretary, NITES to Economics Times.

As a part of NDLF, we show our solidarity. The need for unions is increasing and we strongly believe the unity of IT employees in the form of the union only make corporates to stop such acts against poor IT employees

As per the Economics Times statement, “Tata Group Chairman Emeritus Ratan Tata on Thursday said retrenchment of employees by Indian companies in these COVID-19 unprecedented times is not the solution. It was also claimed that Tata Group has not fired any staff, while several Indian companies have cut the workforce because of lack of cash flow after the countrywide lockdown. Hence, we request Tata Technologies to follow what is being claimed and stop the furlough with immediate effect. Forcing employees to resign under lockdown is against Government’s directions and also against the work ethics”

We will have a closer look at this statement in the coming part of what this statement means to IT employees.

• Shyam Sundar