Two major home-grown firms, Ola and Paytm are the latest to join the club of companies who are in the process of downsizing their workforce. After recent lay-offs being reported at Cognizant, Capgemini and WeWork among others, news suggesting ‘more retrenchments to come’ spells danger for whole of the Indian IT sector.
With an aim to ‘turn profitable’, ride-hailing major Ola has decided to downsize its 4,500 strong staff by 5 to 8%, Livemint reported on November 29. As a result, nearly 350 employees will be looking at an exit from the company’s operations team in the coming days.
This is in addition to the company also moving some employees to its other branches, namely, Ola Electric, Ola Foods, and Ola Financial Services as part of its organisational restructuring.
Paytm, a digital payments giant, is also in the process of trimming its mid and junior level staff. Following the strategy to ‘curb expenses’, Entrackr reported the digital payment platform deciding to lay off over 500 employees.
“We received calls from our immediate bosses saying that something isn’t right. Within hours, the human resource function called up and asked us to resign. We got a standard two months salary but asking abruptly to leave didn’t go down well with us,” an employee who had been asked to leave Paytm was reported as saying.
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At the outset, the different portfolios of the companies may make the latest developments to appear different. However, a closer look reveals that a pattern can be established between them – both the companies are eyeing for an initial public offering (IPO) in the coming years and their drive to show positive financial books along with a common foreign investor changing its strategy is pushing them for retrenchment.
While Paytm was reported to consider listing on the stock exchanges post 2021, Ola is planning the same a bit earlier, within the next two years. Going public means both the companies have to undertake a restructuring exercise ensuring Paytm and Ola record profits in their books. As far as the employees are concerned, the period is nothing but one to cope with fear and anxiety, as ‘restructuring’ means mass retrenchments and increased work pressure awaits them.
At first, Padmaja Pawar, Vice-President of Maharashtra’s Forum for IT Employees (FITE) calls the retrenchments “illegal”. According to her, a 30 to 90 day notice period is not served in most of the retrenchments that were observed recently within the IT sector.
“As per the provisions laid down in the Industrial Disputes Act, 1947, before a mass retrenchment, the companies are also required to inform the government about the development, however, this has never been the case,” she said. Moreover, the retrenchments cause a ripple effect on the existing workforce of the company for whom work pressure increases, she added.
Incidentally, retrenchments at Paytm and Ola also has much to do with their common foreign investor, namely, Softbank. As reported, with the Japanese investing firm changing its strategy—from chasing growth earlier to focusing on profits now—results are now getting reflected in the Indian IT sector too.
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“The investors care about profits and not about the welfare of the employees who generate the profits,” Bharanidharan, President of Union of IT & ITES Employees (UNITE), told NewsClick, adding that, “this phenomenon of Indian companies wooing foreign investors at the cost of the employees needs to be challenged.”
Having said this, Bharanidharan asserted the need for the unionisation of the IT workforce in India, a process still new within the IT firms active in India.