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Why Layoffs Happen & What Students Can Do to Stay Ahead
Table of Contents
The Layoff Lanscape : Reason & Law
Layoffs occur when companies reduce their workforce to cut costs or adjust to lower demand. Unlike being fired for poor performance, layoffs typically happen because a company faces financial challenges, restructuring, or changes in market demand.
For example, rising interest rates have made borrowing expensive for businesses, leading to reduced investments. Startups, heavily reliant on venture capital, are particularly affected as cautious investors reduce funding, causing job cuts in tech firms.
Overhiring During Growth Phases
During periods of rapid growth, many companies hire aggressively to meet rising demands. However, when market conditions slow or stabilize, these companies often find themselves overstaffed. This is especially common in the tech sector, where scaling quickly is a priority, but maintaining large teams during downturns becomes unsustainable.
Investor Pressure
Investors expect companies to maintain high profits even during slow growth. This pressure has driven companies like Meta and Alphabet to cut costs through significant layoffs.
Ample Funding Turning Scarce
In recent years, ample venture capital funding allowed startups and tech firms to expand without financial constraints. However, with economic uncertainty and higher interest rates, funding has tightened. Many startups now struggle to secure new investments, forcing them to scale back their operations by cutting jobs.
Economic Challenges
Economic slowdowns and fears of a recession force businesses to cut costs. Layoffs become a common strategy for managing reduced revenues.
AI and Automation
Artificial intelligence is transforming the job market. While it creates new opportunities, it also automates many roles, leading to layoffs in redundant positions. For instance, companies like IBM have cut jobs as they transition tasks to AI systems.
Inflation and Rising Costs
Inflation increases operational costs, forcing businesses to reduce spending. In sectors reliant on advertising, like tech, reduced ad budgets directly impact profits, leading to layoffs.
Industry Maturity and Slower Growth
Over the past few decades, the tech sector has seen rapid growth, but it is now entering a more mature phase. Many companies have already captured most of their target market, leading to a slowdown in growth. With fewer opportunities for expansion, these companies are shifting their focus toward optimizing efficiency and boosting profitability. As a result, reducing staff or restructuring becomes a necessary step to stay competitive in a more stable market environment.
Recent Layoffs (2024)
| Company | Layoffs (approx) | Reason/Details |
|---|---|---|
| Microsoft | 800 employees | Focused on gaming division; follows 1,900 job cuts earlier this year. |
| Cisco | 6000 employees (7% of workforce) | Further cost-cutting after an earlier round of 4,000 layoffs. |
| Qualcomm | 256 employees | Post-previous layoffs of 1,250 workers; cost-cutting measures. |
| Apple | 150 employees | Job cuts in its digital services group, affecting Books and News teams |
| Intel | 15,000 employees (15% of staff) | Significant layoffs due to underperforming revenue growth. |
| UKG | 2,500 employees (14% of workforce) | Redirection of resources into key product innovation areas. |
| Udemy | 300 employees | Restructuring; half may be rehired, especially in lower-cost markets. |
| Dell | over 12,500 employees (10% of global workforce) | Modernise operations and focus on artificial intelligence |
| 1400 employees | Cost Cutting | |
| Paytm | 3500 employees | Rising complaints and regulatory issues |
| Flipkart | 1500 employees | Growing demand for new skills |
| Amazon | 14,000 employees | To improve decision-making, and reduce bureaucracy |
| Bosch | over 7000 | Financial crunch |
| Visa | 1000 | Unknown |
| IBM | over 4000 | Workforce rebalancing |
Understanding Layoffs: Legal Insights
Under the Industrial Disputes Act, 1997, specifically Section 2 (kkk), a layoff occurs when an employer is unable to provide work due to various circumstances. Importantly, layoffs are temporary and differ from retrenchments, which involve permanent job loss.
Conditions for Layoffs under the Industrial Disputes Act
Employers must meet specific criteria to legally implement layoffs:
- Inability to provide work: Employers must demonstrate that work cannot be provided due to factors such as resource shortages or other business challenges.
- Eligibility: Only employees officially listed on the company’s roll are eligible for layoffs.
- Temporary Nature: Layoffs must be temporary, not permanent terminations.
- Valid Reasons: Layoffs may result from issues like shortages of power, machinery, or even natural disasters.
The Industrial Disputes Act (IDA) and IT Sector Layoffs
While the IDA sets clear guidelines for layoffs, it primarily applies to industries like manufacturing and construction. The Act does not typically cover IT workers or employees in managerial or supervisory roles. The term “workman,” as defined by the IDA, generally refers to manual or technical workers, excluding most IT professionals.
Employment Contracts: Most IT professionals are governed by employment contracts that outline the terms for layoffs. If laid off, employees should review their contracts to ensure compliance with agreed-upon conditions, such as notice periods and severance pay.
"Workman"
The term “workman” in the IDA refers to those engaged in manual, skilled, or technical work in sectors like manufacturing. However, IT employees, particularly managers and supervisors, are usually excluded from this category. In some cases, technical roles like developers or coders may still be considered “workmen” based on their job duties.
Legal Recourse for Workmen Facing Layoffs
For employees classified as “workmen” under the IDA, there are legal protections in place. Workmen who have been employed for over 240 days in a year can challenge layoffs and seek legal recourse. In such cases, a company cannot terminate employment without following proper procedures, including obtaining government approval.
Legal Options for Employees Outside the IDA
Even if the IDA doesn’t apply, employees may still have legal options if they feel their layoff was unfair or if their employer violated contract terms. For example, employees can file a civil lawsuit for breach of contract if the company fails to provide the severance or benefits promised in their contract.
Compensation for Layoffs Under Indian Labour Law
Employees who have worked continuously for at least 12 months before being laid off are entitled to specific compensation. According to Section 25C of the Industrial Disputes Act, such employees should receive half of their basic salary plus a dearness allowance to help offset the rising cost of living.
How to Secure Your Job During a Recession
With rising interest rates and an increasingly competitive global workforce, maintaining job security during a recession can be difficult. However, by taking proactive steps, you can increase your chances of keeping your job during tough economic times. Here are the best ways to secure your position:
Update Your Skillset
Staying up-to-date with industry trends and expanding your skillset is crucial in today’s fast-changing job market. Keep an eye on emerging trends in your sector and continuously upgrade your skills to stay relevant.
Being adaptable and knowledgeable about the latest tools and technologies will make you indispensable to your employer and reduce the likelihood of being replaced by someone less experienced.
Invest in Personal Growth and Learning
Always seek personal growth and continue learning new things, whether through professional development courses, new projects, or expanding your role within the company. This proactive approach will not only make you more valuable to your employer but also help you stay prepared for future opportunities.
Reflecting on your experiences and constantly challenging yourself ensures you continue evolving, which is crucial for career advancement.
Show Flexibility and Adaptability
In uncertain times, flexibility is key. Be open to taking on new roles or responsibilities outside your usual tasks. This demonstrates your adaptability and value to the company, showing you are committed to the organization’s success, even when resources are stretched thin.
Stay Informed About Your Company’s Financial Health
Being aware of your company’s financial situation is crucial. If layoffs are occurring in the industry, it’s important to monitor news about your company’s performance. If layoffs seem likely, you’ll be better prepared to act, whether that means updating your resume or starting a job search early.
Track Your Contributions and Achievements
Keep a detailed record of your achievements and contributions to the company. Documenting your success gives you a tangible portfolio of your work, which is essential during performance reviews or discussions about potential layoffs.
This will provide you with the leverage to demonstrate your impact when you need it most.
Seek Regular Feedback
Don’t wait for annual performance reviews. Regularly seek feedback from your managers to understand how you can improve your performance. Using this feedback to align your goals with the company’s objectives will make you a more valuable employee, especially during economic downturns.
Stay Informed About Your Company’s Financial Health
Being aware of your company’s financial situation is crucial. If layoffs are occurring in the industry, it’s important to monitor news about your company’s performance. If layoffs seem likely, you’ll be better prepared to act, whether that means updating your resume or starting a job search early.
Avoid Gossip and Office Rumors
Office gossip can quickly spiral out of control, damaging your professional reputation. Avoid participating in or spreading rumors about your colleagues. Not only can this hurt your co-workers, but it can also tarnish your image as a team player.
Focus on building trust and maintaining professional relationships to solidify your place within the company.
Explore Better Job Opportunities
While it’s essential to focus on job security in your current role, also keep an eye on job opportunities through platforms like Hirist. This will help you stay informed about new roles that match your expertise and long-term career goals, ensuring you’re always prepared in case of unexpected changes.
The Future of Work
The current wave of layoffs in the tech sector raises key questions about the future of work. As companies increasingly prioritize AI investments, the need for human workers may diminish. However, certain sectors, like data center construction, continue to see strong demand, fueled by the growing need for AI infrastructure.
Resilience and Adaptability
In this period of uncertainty, it is crucial for both companies and workers to remain adaptable. Upskilling in AI, exploring new career paths, or even starting new ventures can help employees remain competitive and seize opportunities. Companies that succeed will prioritize resilience, empathy, and the cultivation of a strong internal culture.
A Crossroads for the Tech Industry
This is a pivotal moment for the tech industry, as it faces one of its most significant challenges. How companies treat their workforce during this transition will shape the future of innovation and growth. The key to success lies in navigating this disruption while fostering an environment that values both people and progress.
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