9 min read.Updated: 12 May 2020, 12:14 AM ISTGoutam Das
As the pain from covid-19 intensifies, the higher layers of India’s job pyramid are facing the heat
While variable pay will disappear, a few organizations are delaying a part of the fixed compensation. It would be paid out at the end of the year as a ‘longevity payment’.
NEW DELHI :
At 11.45am on 6 April, an HR professional working with NIIT Technologies was requested to “catch up" with his supervisor via Microsoft Teams. What followed wasn’t pleasant. “Put in your resignation over email and write you are resigning due to personal reasons. That way, your background checks will not get affected in the future," the supervisor told him in a measured tone, adding that a Boston Consulting Group audit had flagged extra employees in HR.
Six other employees from NIIT Technologies’ HR department were asked to put in their papers the same day.
The company did not officially clarify why the lay-offs came in April, during India’s lockdown to flatten the covid-19 curve. Runki Goswami from NIIT Technologies’ communication team called this writer twice to explain that the terminations could be performance linked. On May 5, the company’s management, during an analyst call, alluded to “very aggressive cost cuts"—although retrenchments were not mentioned, the company did highlight cancellation of salary hikes besides “wage cuts for partial year".
The professional is the only earner in the family. Worse, he has two equated monthly instalments (EMIs) worth ₹21,000 to service.
As factories in India and much of the world stopped humming, offices shut down and people stayed indoors, many businesses faced a slide they haven’t seen in decades. This has led to tremendous job insecurity among India’s white-collar employees—the ranks of office and professional workers. The fallout of covid-19 lockdown has affected the top layer of India’s job pyramid.
Nearly every company has clamped down on new hiring as a first step towards keeping expenses low. There is a near complete hiring freeze for white-collar roles in aviation, tourism, hospitality, e-commerce, media, logistics, real estate and construction. Many companies have dumped performance appraisals and bonuses for the year, and have sent employees on leave without pay. Retrenchments in companies with weaker cash flow are just about beginning.
Of course, this jobs shock pales before the suffering of the marching migrants and plight of employees in the unorganized sector. That said, the stress in the white collar space shows the fallout from covid-19 has not spared any segment.
Indian white-collar workers have seen through two previous crises—the dotcom bubble burst in 2001-02 and the financial crisis that followed the collapse of Lehman Brothers in 2008-09. Entrepreneurs and employees lost their shirts in both. The current pandemic, however, outweighs everything, simply because of the number of industries hurt and the countries it has swamped.
In March, Mint predicted that about 136 million workers in India employed in non-agricultural sectors have no contracts and are the most vulnerable in the aftermath of the coronavirus outbreak. While the first phase of the covid-19 outbreak impacted many of them—the daily wagers and blue-collar workers—the aftermath would jolt the higher-paid, upwardly mobile white-collar employee.
The Centre for Monitoring Indian Economy has stated that the count of salaried employees has dropped from 86 million in 2019-20 to 68 million in April 2020. However, even blue-collar workers can be salaried. Thus estimating the white-collar workforce at risk is a tricky proposition. Experts said that up to 20 million of them could be at risk of being axed.
K.R. Shyam Sundar, labour economist and professor of human resources management at XLRI, Jamshedpur, explains. “The services sector, which employs most white-collar employees, has been the worst impacted because of covid-19. The sector employs 144 million. If you exclude government and other core private sector jobs in services, the workforce totals around 100 million. About 30% of these jobs would be at risk," he said. He pegged the white-collar employment in peril at a staggering 20 million.
Devashish Sharma, chief business officer of Taggd, the recruitment solutions brand of HR-tech company PeopleStrong, has a lower number. He feels about 2.4 million of the white-collar workforce could be laid off post covid-19. India’s workforce in the organized segment totals about 37 million. Around 8 million of the organized sector are white-collar employees today, he said. That number could shrink to 5.6 million by the end of May.
Bloodbath in June
In his rented home in Pune, a business process outsourcing (BPO) worker spends time on free courses on a computing language called SQL (Structured Query Language). The 29-year-old man was pink-slipped in April. The senior process associate, as he was called, was doing well in a technology support role for Amdocs, a software and services multinational. He was not employed by Amdocs directly, but via the rolls of a staffing company. Staffing companies hire and place workers on fixed-term contracts with clients.
“Many associates started receiving e-mails mentioning their last working days. It was 8 May 2020, for me," he said. No one explained why his project came to an abrupt end. “My contract was for two years but I was asked to go after 15 months," the associate said on the phone. Now, he has little clue on how to pay back his personal loan EMI of ₹6000 a month, besides rent. Other colleagues who were fired, he said, had bigger liabilities, including home loans.
A spokesperson from Amdocs said that the company complies with all applicable laws and that no Amdocs employee has been terminated in India as a result of the coronavirus situation. That’s technically correct since the employees whose contracts got terminated were on the roles of the staffing companies.
Over 100 of those who lost jobs at Amdocs raised a complaint with a local union, the National Information Technology Employees Senate (NITES). The union is exploring legal options since the terminations violate state government notifications against lay-offs during the lockdown. Additionally, the union has filed a public interest litigation in the Supreme Court detailing how “several companies across the country have started to terminate its employees without any reasonable cause or have started withholding their salaries".
Anticipating legal complications, lawyers have advised corporates to hold on to their employees till the lockdown is completely lifted. “We are advising clients on a mutual settlement with the employee since there are penal provisions under the Epidemic Diseases Act and the Disaster Management Act," said Suyash Srivastava, partner at L&L Partners, a law firm. The two acts can be invoked against an employer if a government notification is disregarded.
Nonetheless, employees in companies with falling revenues see the writing on the wall. It is a matter of time before large-scale lay-offs are announced, starting May-end or June. A small number of companies have already made their retrenchment plans public. Clothing brand Blackberrys, for instance, said that it has downsized its employee base by 120 and the measure was “essential for the survival of Blackberrys". Then, food delivery company Swiggy said that it planned to lay-off kitchen and support staff over the next one month. Although the company did not confirm, estimates of the number vary between 500 and 900.
The support staff could form the bottom but heavier rung in a company’s employee pyramid. When they are pink-slipped, the whole pyramid shrinks, Rituparna Chakraborty, co-founder of staffing firm TeamLease said. If there are less people at the bottom, a company, by extension, can do with fewer managers and supervisors. “Heads will roll across organizational structures. The cost of 500 or 1000 people (at the bottom) in a few companies would be equivalent to 50 of the middle managers".
Salary bubble has burst
About 40 employees from a financial advisory firm came online, with glasses of wine and whiskey. Some joined with water. It was a virtual ‘happy hour’—there was even someone singing yeh shaam mastaani.
The event was organized by Vista Rooms, an upmarket holiday home rental company. The firm grew aggressively over the last year adding 350 villas across India. It did a business of ₹4 crore a month till February, employing 200. Till covid-19 struck. “We are preparing for a scenario where it would take a long time for things to pick up," co-founder Amit Damani said. Damani asked 25% of his employees to go on leave without pay. The rest took an average of 30% haircut in salaries.
The virtual events are a way to keep his employees busy. Corporates signing up pay a fee of ₹5,000 an event.
In exchange, they get travel credits to stay at Vista Rooms’ properties, whenever they get comfortable with travel.
Like Vista Rooms, many other organizations have announced salary restructuring. Mint had earlier reported that national carrier Air India Ltd had initiated a 10% salary cut for its employees; nearly all private airlines have either cut or deferred pay. Some have asked a section of their staff to go on leave without pay. Apart from aviation, there have been salary cuts in most front-line sectors: hospitality, F&B (food and beverage), travel, technology, media.
“Almost in all cases, the variable pay will vanish because company’s performance would be impacted," said Shiv Agrawal, managing director of talent acquisition company ABC Consultants. “We are looking at a minimum 18-24 months hit for an employee, for them to get back to where they were before covid-19. We are telling people—write-off 2020."
Vice-presidents and above were at a 30-40% variable pay in some companies. Post-covid, the variable component could grow to 50%, Devashish Sharma of Taggd predicted. Variable pay at mid-management levels used to hover around 15-20%; it is moving to 30-35%. Junior roles rarely included variable components—that would change, too. In addition, a few organizations are delaying a part of the fixed compensation. It would be paid out at the end of the year as a ‘longevity payment’.
“The bubble on inflated salaries," Sharma said with a pause, “has burst."
The gig worker
On Instagram, Yash Chandak has a four-word account of what he does for a living: “I move pixels around".
He is a visual artist, one who creates video content for live events such as music festivals. He worked with a design studio in Goa but left in August 2019 to work independently in Mumbai. That was a lifestyle choice. “When I started freelancing, I loved freedom. I also made more money than in the permanent job," he said. In a good month, Chandak made close to a lakh.
The gig economy, where workers find work through digital platforms, have largely come to be associated with the blue-collar, such as drivers and home services professionals like plumbers. However, there is an equally large population of the well-paid white-collar gig workers (the erstwhile freelancer) whose remuneration is variable, per project or on outcomes. Chandak is one such worker.
Covid-19, experts said, is likely to make companies contract more gig workers rather than hire employees on a fixed salary. “Reducing costs is the only way to survive. People have become very familiar with the idea of gig work. Now, companies are more open to it," Sairee Chahal, founder and chief executive officer (CEO) of SHEROES, a women-only social networking platform, said. The platform has many gigs, from home chefs and make-up artists to designers and telecallers.
Covid-19 is not necessarily good news for the likes of Chandak, though. White-collar gigs always complained of delayed payments. Cycles would worsen with the current crisis. Second, their performance-linked pay could be squeezed.
Well-funded startups have been putting pressure on telecalling rates for a few years, for instance.
Chahal said that while most Indian companies pay okay rates, startups funded by large multinational Japanese venture funds pay only ₹1 a call. Considering one manages to make 200 calls a day, the payout would be lower than the daily wage rate in most cities. Going ahead, rates are likely to be pushed down further, not just for telecallers but also for gig workers who create content, make data entries, and carry out search engine optimization.
The pandemic has made Chandak introspect. There are no music festivals any longer. When things get better, he is unlikely to command the pay he did in February. “It would have been nice to have a job," he said. “You know, a stable income coming in".
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