Covid-19 crisis: India Inc reaches for pink slips as cash flow dries up

After layoffs in the gig economy, India Inc is gearing up for firings in the manufacturing, airline, hospitality and financial services sectors. Large financial companies with customer service departments and back-office operations, are likely to see employee cuts, say head hunters and chief executive officers.

While textile firm Raymond, financial services major Indiabulls, Thomas Cook, and SOTC are already in the process of trimming staff, large conglomerates like Tata Group, Aditya Birla Group, and Reliance Industries have refrained from doing so till now. Senior staff of all the top groups have taken salary cuts up to 20 per cent to preserve jobs at the bottom of the pyramid.

Raymond has let go of 800 of its 7,000 employees in the past few weeks. Company officials said the layoffs were in line with the prevailing market conditions and unprecedented challenges, and the company had undertaken cost rationalisation to minimise the impact on its business.

“We are, as an organisation, challenging all costs and also restructuring our organisation to optimise costs. Cost reset is absolutely essential to maintain liquidity and also ensure that we emerge stronger from this crisis. All the measures and action taken are in the overall interests of stakeholders,” said a Raymond spokesperson.

Indiabulls Housing Finance has sacked 2,000 of around 20,000 workforce over the past month. Company executives said the focus now was to manage interest expense, which was a far bigger cost element than spending on salaries. There is a hiring freeze till the economic conditions improve in second half of the current financial year, said Gagan Banga, vice-chairman and CEO of Indiabulls.

In the hospitality sector, sources said, tour operators Thomas Cook and SOTC laid off around 200 employees, as the travel business came to a grinding halt because of Covid-19. Those who were laid off included a few in senior roles. Thomas Cook did not respond to a query on pink slips on Wednesday. The senior management of Thomas Cook had taken a 33 per cent pay cut to be spread over three months. Non-essential expenses, too, were cut.

No workers

Manufacturing is one sector that cannot work from home and has already lost a lot of resources, with migrant workers returning to their home states. Several companies are facing unprecedented shortage of manual labour. Work at several small-sized steel companies and at Navi Mumbai airport has stopped. This, CEOs said, will lead to firings of white collar workers as plants remain shut.

Rituparna Chakraborty, co-founder of recruiting firm TeamLease, said anywhere between 30 per cent and 50 per cent of migrant workers had returned home. “My sense is that it will be a challenging for manufacturing companies to resume operations if they haven’t planned their workforce availability.”

Lifestyle Retail has been impacted revenue-wise from Day One of the lookdown, and will also lay off staff. “Especially, in lifestyle malls, and luxury stores, there will be layoffs,” she said. “Discretionary products that include fashion, high-end watches, and non-essentials will be hit,” she said.

“The only ones keeping their heads above water are e-grocers, essential goods, health care and pharma,” Chakraborty says. Large financial companies with customer service departments, and back-office operations, are likely to see employee cuts from next month. “The other side of the coin is that to find good people is not that easy in India and that is weighing on employers’ minds.”

Corporate India is warming up to the idea of transition services and several companies are choosing to stay invested in their employees even during the current crisis transition. “This is something we did not see, not to this extent, in the 2008 or 2013 slowdowns,” said Sue Ann Vaz, head of value added services at ABC Consultants.

Some CEOs, however, said performance will be key while taking a decision on layoffs. “Going forward, we will lay off all non-performers and hire new people in their place,” said Vikas Oberoi, CMD of Oberoi Realty.

Red Flags

• Financial services, manufacturing sector to lay off staff
• Large conglomerates cut salaries, but no lay offs
• No job cuts expected in essential goods, health care and pharma sectors
• Back office operations may see more job cuts
   

(With inputs from Raghavendra Kamath)