Boom and bust

There is growing uncertainty about job security in the I.T. sector; and the retrenchment of “non-performers” by TCS in Hyderabad has come as a grim piece of evidence.

The signage of Tata Consultancy Services displayed atop a building on the Synergy Park campus in Hyderabad.

The subhead “workforce” on the information technology (I.T.) company Tata Consultancy’s Services’ website claims: “TCS has over 353,000 of the world’s best-trained I.T. consultants in 45 countries.” This claim took a serious beating when on December 11, 2014, the global head of the company’s human resource (HR) division, Ajoy Mukherjee, stated at a news conference in Bengaluru that TCS was “restructuring its mid- to senior-level” employee strength in order to weed out “non-performers”.

The two months that followed witnessed the unravelling of a sector synonymous with the “India shining” growth story, confident, futuristic and without the shackles of the pre-1991 “licence raj”.

It turns out that this “restructuring” is an industry-wide exercise practised every year following an appraisal process based on a rating system. For example, Tech Mahindra, formerly known as Satyam Computers, made infamous by India’s first corporate scandal, has a four-tier rating system for its one lakh employees. A long-time employee of the company said: “The top 10 per cent is given a four rating, the next 80 per cent is given a rating between three and two, and the last 10 per cent would be on a one rating, or better known as the non-performers’ category.” The company then attempts to weed out the last category on a staggered basis, usually on a percentage point anywhere between 1 and 5 annually. “Not all were let go. But a company is conscious of the net earnings declared every quarter, and the salary component impacts that. This can potentially bring profits down, in our case, in the fourth quarter, and consequently the share value as well.”

The appraisal model, called the Bell Curve method, is widely used not just in the I.T. sector but by other sectors as well worldwide. The best performers are at the top of the bell, with the middle bulging and the bottom fanning out like a bell. Following the TCS’ lay-offs of 2014 and 2015, several companies came under severe criticism for the use of the Bell Curve model as a process susceptible to rigging and nepotism and as something that is opaque and encourages divisions within the workforce. For example, a former Hyderabad-based TCS employee said he received a three out of five for his performance, which is considered satisfactory, just a month before he was asked to leave in mid January last year. He had even received the “Best Performer” award for the project that he was working on in October 2014. And yet, he was asked to leave the very same project a month before it was to be completed. The employee said the Bell Curve assessment process forced managers to fit their team members into categories that might not adequately represent their performance. This rating is then used as an excuse to sack an employee. What has become more detrimental for them is the “non-performing” tag, which decreases their chances of re-employment.

In order to stave off criticism, companies began claiming that this assessment model was being replaced with something more robust and with greater “employee-manager interaction”. But it is not clear what this new assessment process is.

Companies are now thinking of reduced pay hikes as a way of cutting “overheads”. A senior Chennai-based human resource person in the sector, who did not wish to be named, said the annual revision in pay hikes, even if it is only 3 per cent, is the biggest hit for any I.T. company, which has to then “offset” this expense with something else. One way of offsetting has been the “weeding out of non-performers” or “restructuring”, the term most industries now use for lay-offs.

TCS claimed that it laid off only 2,574 employees, mainly targeting senior to middle level employees for non-performance. The press conference was intended to be boastful about how many hires the company had made in 2014, but it turned out to be quite the opposite, leading to organised protests by retrenched employees nationwide.

Hyderabad is one of TCS’ major operation centres. Several employees were retrenched here. Employees claimed the number to be close to 25,000 jobs nationwide. The company’s own figure was 1-1.5 per cent of its 310,000-plus employees. Industry observers and HR consultants put the annual retrenchment figure closer to 5 per cent. They say this is routine among the market leaders including, Infosys, Cognizant Technologies, Wipro and HCL. But even a 5 per cent estimate would mean a retrenchment of over 15,000 employees annually at TCS alone.

In early 2015, several Hyderabad-based TCS employees filed a case in the High Court seeking reinstatement and a halt to retrenchment. The court issued notices to TCS, but the case has not moved beyond that. For the employees, unaccustomed to court procedure, any legal document that came their way became a traumatic experience, said Kiran Chandra, one of the founders of the Forum for IT Professionals (ForIT), an association working to represent their grievances. For example, a caveat filed by TCS, which is a general tactic by any party to a court case to ensure that they are given a chance to be heard before the judge passes an orders involving it, was received with shock by the retrenched employees.

No organised employee representation The lack of organised employee representation is now felt across the industry. A sacked TCS employee, who has two schoolgoing children, wished there were “different forums where these issues could be discussed”. He said: “I was 25 when I joined TCS. All of us then did not think about unions and job security. We were happy to get a job. We may not even win this case, but it should make people aware of what is happening in the I.T. industry because this is seen as a booming sector. It appears rosy from the outside, but it has not been rosy from the inside. Job dissatisfaction has been there ever since the 2008 recession. Only big companies have been holding off mass lay-offs, but that is beginning to crack now.”

Union leaders point to the difficulty of organising I.T. employees. They say the transient nature of placements in various projects does not enable easy mobilisation, especially when employees are sent abroad for months together.

One of the ways of cutting costs has been to get rid of mid- to senior-level talent, as TCS has done. Employees with 15-plus years of experience are now replaced with either students fresh out of college or those with no more than five years of experience. The other way has been to recruit from lesser known colleges for far lower starting scales. Most of the companies rank engineering college recruits in three tiers, tier one being the most reputed and with the highest starting salaries. But companies are now ready to hire graduates holding bachelor’s degrees in science, as opposed to an engineering degree, as they accept much lower pay. They are then trained in-house for various applications on a probationary period of three to six months. This probation is called the “billing holiday” period as the employee is not placed in a job where the company is “billing” its clients for his services. Annual salaries for fresh recruits range from Rs.3 lakh to Rs.5 lakh.

A senior Hyderabad-based I.T. HR person said even the hiring of college graduates had come down significantly. She said: “We do not do bulk hires any more, which was the case about six years ago when we recruited 10,000 people at one go.” She said TCS employees should have sensed the imminent lay-offs as “anyone in the industry knows that if you have not been placed in a project for over three months, you must start looking for something else, or somewhere else”.

The I.T. sector’s business model has been skewed right from the start. Its hiring cycle has been based on anticipated demand and not materialised contracts. Kiran Chandra said every company had a “bench strength”. That is, employees who are hired in anticipation of a project materialising or those between placements. Or sometimes simply more hands to show a ready available talent pool capable of being deployed immediately.

“There are usually two ways of hiring, either replacing manpower in an existing project or projecting to a customer that there are readily deployable numbers. As the bidding process is highly competitive, finally I might have to bench a lot of my talent if I am not successful,” the HR person said. The time frame could be three months or even an indefinite period. In short, this means that for many recruits job insecurity begins immediately after being hired. But no company states in employee contracts how it will handle the process of benching or the transition and the number of months or the safety net period when the job can be considered safe.

The I.T. industry is also highly pampered with governments often granting orders that are unconstitutional. The undivided Andhra Pradesh government, for example, framed a five-year I.T. policy in 2010, which has now been updated and adopted by both the new States of Telangana and Andhra Pradesh. The policy exempts I.T. companies from almost the entire gamut of India’s labour laws: the Factories Act, 1948; the Maternity Benefit Act, 1961; the AP Shops & Establishments Act, 1988; the Contract Labour (Regulations & Abolition) Act, 1970; the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; and the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959. This is apart from stamp duty exemption for land registration for new companies, power subsidies for five years, and exemption from any clearances from the Pollution Control Boards.

A body shop Today, the $300-billion I.T. and business process outsourcing (BPO) industry is largely a body shop that deploys manpower among its various clients worldwide overwhelmingly to maintain software products and enhance and customise them. The core area of development of the early 2000s quickly waned into product maintenance as applications flooded every area of commerce, transforming almost any kind of work, from bookkeeping, attendance and payroll to news writing and editing. According to the National Association of Software Services Companies, better known as NASSCOM, a non-profit advocacy body of the I.T. sector, the combined workforce of the industry is over 30 lakh employees representing a quarter of India’s organised sector.

The lawyer for the Hyderabad-based retrenched employees of TCS, Satya Prasad, said: “In the name of liberalisation and promotion of the I.T. sector, the government has not tried to understand what is going on within the sector. If you look at the people I represent, they are people who are married and with children and elderly parents. Some of them were earning lakhs of rupees and thought they had achieved their dreams by securing a job at TCS. After the lay-offs, their marriages have failed and their lives are ruined.”