Tech Mahindra Retirement Age Change – Is it Legal?

Tech Mahindra is again in news in the beginning of the month for reducing retirement age of its employee in “U” band from 58 to 55. This “U” band forms the major portion of the employees. In addition to resorting to forced resignations for illegal layoff, now Tech Mahindra has found another way to send out people before their superannuation. There are news reports that HCL technologies also reduced the retirement age of employees to 55.

In India, general retirement age for employees in IT companies is 58 or 60. But as we all know, many employees are forced to retire in their 40s as the companies look to cut costs by laying of experienced employees replacing with younger graduates. IT companies consider senior employees as a liability, not asset as in other sectors.

The retirement age

First let us look at the retirement age issue. What should be the retirement age for a healthy, skilled employee?

The current living trend and medical inventions increased the average life span of employees. Many people live healthy, active lives well into their 70s and 80s. When the active life of a person was some where around 60 years it was reasonable to have the retirement age at 58, but now the general trend is towards increasing the retirement age and making use of the experience and knowledge of senior persons.

Moreover, people used to marry early in the early 20s or even at 18/19. But now due to many commitments including studies and career development, many people get married at the age of 30 years only. As many people are getting married late, their children education and marriage are delayed and early retirement will be a concern. That’s another reason for increasing retirement age.

Take the case of central government employees. Now the retirement age is 60. In 1998, it was increased to 60 from the earlier 58. There are requests from working clause to increase the retirement age to 62 from current 60 years. This is the general trend.

But unfortunately IT companies focus more on increasing profits at the cost of employees and long term interests of the company. They explore various options to cut costs. They try various methods to cut down senior resources as their salary is higher and want to replace them with junior employees. Reducing retirement age while the general trend is towards increase in retirement age is another such method.
The reason quoted by many of the companies for cutting down senior employees through forced resignation is one of the following:

  1. Senior employees do not adapt to change
  2. Their skill sets are outdated. Technology is shifting to new digital platform and we need to weed out old employees with outdated skills
  3. People who are in the same band or role who have not progressed to higher roles due to their inefficiency only are affected.

Old is Gold

But ground reality is that experience makes a person more perfect.

If you take medical field, there is a lot of invention and changes happening every year. Medical field becomes so advanced where heart transplants on even new born kids are performed successfully now-a-days. In medical field, quality of doctor is determined based on their experience. There is no complaint in medical field that when doctors grow older, they will not adapt to changes. There is no practice of hospitals recruiting new doctors dismissing older, experienced seniors. The risk in medical field is so much as they are dealing with real lives. After all, information technology deals only with wealth and life is more important than wealth. So in medical field if seniority and experience is a plus why in IT industry every company is portraying senior employees as burden.

A senior professor in a university is respected more than a new joiner. If you take most of the chief inventions, majority of them are invented by people under guidance of senior researchers.

So why IT companies are portraying old employees as dead wood to be eliminated as waste.

In IT experience is wasted

The reason for this is very simple. The average cost of new joiners is in the range of INR 20000-25000 per month whereas the salary of 15 year experienced employee is INR 1,00,000 to 2,00,000. In simple terms, company can have 5-6 new joiners instead of one 15-20 year experience person at the same cost.
They don’t want too many senior employers in the pyramid and as employees grow older, naturally higher end of pyramid grows. The management wants to eliminate them as waste by showing some reason. So management to portray people as underperformers and terminate them in various ways. Early retirement is one such tactics.

Let us now have a close examination on Tech Mahindra argument against senior employees. Their complaint is employees are in same band for longer and they are not growing up in the ladder.

In reality, every company has upper and lower band of salaries for each role and position. For example, if you take the example of so called “U” band, definitely Tech Mahindra will have lower band and upper band of salary structure. To make understanding clear, let us assume lower band of “U” band as 30000 INR per month and upper band of “U” band is 70000 INR per month. So if person remains in the same band for many years, salary increments will be automatically restricted. If an employee reached close to upper salary band, he/she will not be provided any increments or very minimal increments to the upper limit. So company is not going to pay more for employees in same band.

The other problem is if everyone grows up in the ladder of pyramid, automatically employees are weeded out with reason as duplicate positions or waste. If you take many of 2A case disputes filed against various organizations, the standard reply is employee is forced to resign does not fall under workman category and they are supervisors. So more progression resulted in more stress for employees as competition becomes high and chances of employee targeted for termination is very high.

So, the problem is the policy of companies which leads to waste and insufficient use of employee talent. Instead of changing their policy and business practice, companies resort to some short term jugglery for profit numbers.

In many ways, the intention of Tech Mahindra and HCL is very clear that they want to cut down cost. These stories of band and digital practices/automations are built to make outside world believe their action is correct.

An appeal to the companies

The company also should consider the social impact it is going to create and put themselves in affected employees shoes. These employees are the reason for companies to turn to such big organization and making them retired as per legal norms is their token of thanks to these employees work.

I am repeatedly quoting this and there is no harm in quoting this again. As per statistics, nearly 8000+ IT employees have committed suicide for various issues in 4 years in Tamil Nadu alone. The reason is predominantly related to their job. So companies should understand the pain from employee perspective and come forward to help employees in such scenarios.

How IT companies get away with this?

The biggest challenge in IT sector is that if an organization makes any policy change which affects the livelihood of employees, people resisting that by raising their voice is less. So companies take advantage of this and formulate policies to cut down cost.

You imagine if such an act of reducing age limit of retirement happens in banking or teaching jobs where unions are stronger, it will become a great news. The workers will jump into strike and fight for their rights if such a move is formulated. The management in other sectors know this for sure and that’s the reason we don’t see any such news in other sectors. This shows the importance of having strong unions among employees. But as IT sector don’t have any strong unions, companies formulate new policies and act as per their own convenience.

On the other side, is this legally correct for a company to reduce retirement age on their own? As I explained in my IT Life fun or series book , I have explained already law of land supersedes individual agreements or policies formulated by companies.

But even law of land supersedes, affected employee are not taking legal battles. There are no major landmark judgements in IT sector for many issues raised including forced resignation. We are referring still only the Ramesha VS HCL case which is the only case where final judgement is given. But in recent times, there are many legal cases filed against various other companies by different people. These cases are in different stages now and judgements to these cases will shape the future of IT employees. I am going to cover various legal disputes filed by affected employees against different organization in a series of articles very soon.

There are no past legal disputes where employee filed concerns like company reducing retirement age happen in any other sector. So if affected employees take these to court, they may get a landmark judgement. If a court gives judgement in favor of employees, many of the companies will stop these acts. But who will bell the cat? It is very difficult as many affected employees don’t want to take risk and take up legal battles.

So the other way to get solution for this problem is strengthening of union. If unions files various 2K petitions on behalf of affected employees or legal cases under Public Interest Litigation, these practices will stop.

– Shyam Sundar, President,
NDLF – IT Employees Wing

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    • Kasirajan on October 26, 2018 at 6:22 pm
    • Reply

    Exp is wasted in it.

    Through agile it is going to revive.

    Client lost confidence in service companies and going for separate interview.

    • Mahesh on October 26, 2018 at 7:36 pm
    • Reply

    Though the legal retirement age is 58, retirement age in software industry is actually 40 now and this will reduce further if we are not taking care.

    • Kasirajan on November 1, 2018 at 12:52 am
    • Reply

    One day it will become 35 ..

    Now NEEM is going to make it as 40

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