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Global Outlook of Layoffs
Layoff: A layoff is the temporary or permanent termination of employment by an employer for reasons unrelated to the employee’s performance.
According to a global placement and coaching firm, the global layoffs crossed 60,000 in September and October alone.
Tech sector: Among all, the tech sector has been witnessing massive lay-offs including tech giants like Amazon, Twitter, and Meta etc.
- As many as 853 tech companies worldwide have laid off about 137,492 employees in 2022.
Reasons for the Mass Layoffs
Cost Cutting: The companies are not making enough profits to cover their expenses or because they need substantial extra cash to address paying off debt.
Macroeconomic Instability: The job cuts have been mandated and deemed necessary amid rising inflation, fears of recession, tighter investment budgets, energy shocks, and sparser startup funding.
- The International Monetary Fund (IMF) has cited forecasts for global GDP growth in both 2022 and 2023 as gloomy, given the pandemic and ongoing Russia-Ukraine Conflict.
Overhiring During the Pandemic:
- During the pandemic, there was a surge in internet consumption which led to mass hiring by tech companies anticipating the boom to continue even after the pandemic.
- However, as the curbs were eased, consumption fell, resulting in heavy losses to these big tech companies.
Russia-Ukraine War: The war has also contributed to these layoffs as it has made the market more volatile. This is clearly visible from stock market volatility.
What is the Outlook for the Indian Companies?
Layoffs: 52 Indian startups have laid off 17,604 employees so far in 2022.
Edtech sector: Indian Edtech startups have laid off the most employees so far, accounting for about 43% of the total layoffs this year by Indian startups.
IT industry: The Indian IT services firms are among the largest employers in the organised sector and any global economic trend is bound to have an impact on their growth projections.
What Happened in India during earlier Global Recessions?
During earlier global recessions, while companies seldom publicly announced layoffs, they would all look to ease out staff who were lower down the performance ladder.
Businesses in exceptionally difficult times reduced bench strength.
What happened in the aftermath of the 2008 recession that stretched well beyond 2-3 years is that companies would start slowing down headcount addition.
Campus placements would decline or offers would be made but absorption into the company could well take 9-12 months from the time of offer.