Why the Layoffs, Managing finances

“My world turned topsy-turvy in just 20 minutes when I was given the pink slip. Even in my wildest dreams, I had not imagined I would be thrown out of my job… I did not know how to react. I looked around and found I was not the only one. Some of my sacked colleagues were reacting angrily, some were crying , some begging with the HR personnel to give them time  ,” said a techie with seven years of work experience. “What do I tell my family? How will I pay my car and housing loans? How will I get  another job”.  The article talks about changing face of IT industry, reactions of people on losing job,how to handle finances on losing job.

About the Layoffs

At least 15,000 techies have lost their jobs in Bengaluru in the 2014. The frequency of layoffs has increased. From IBM, Dell, Cisco, HP to TCS, almost all the big companies have cut jobs. TCS layoffs, made techies hit the streets to protest. TCS layoff caught employees and others in surprise, considering that TCS is known for job security. Employees were given no prior notice they were just asked to leave immediately with two months compensation as part of involuntary attrition.  Most of those who have been given pink slips are highly paid consultants and managers who were in managerial positions and were working on a project.  The case become more curious considering that TCS has plans of hiring 35,000+ freshers for 2014-15.  Talks going around have been that TCS  fired mid-level managers who are drawing fat packages and underperforming and replace them with low-cost freshers and train them. These software engineers are finding themselves in a logjam as they are finding it difficult to get past even job consultants as they carry the tag under-performer,forget landing jobs in other companies,

Why are companies doing layoffs?

As per Companies these lay-offs are part of the clean-up process, they are cutting jobs as part of market expansion and growth strategy which involves getting rid of redundant employee.  Every company does this every two to three years when they ask non-performing employees to leave. It’s not like 2008 . Although this is a common practice in most of the IT services companies, firing 25,000-30,000 employees is certainly not normal.

Is IT Landscape in World and India Changing?

World’s biggest IT companies are not shying away from firing employees. Questions that are being raised are How much dynamic and flexible is IT industry and how much job security can it provide? Shouldn’t companies provide training and motivation to assist their under-performing employees? Quoting Forbes  Layoffs In Tech Now A Permanent Feature

What becomes apparent when one takes all these individual company decisions together is that important sectors of tech, which were previously fonts of job growth, are no longer the gold rush that they once were. Yes, some companies are thriving, growing, and hiring. Apple and Samsung, the two biggest winners in high mobility, are stable. And Google, Facebook, Twitter, and others participating in the newer (and higher growth) markets, are doing fine.

Former Infosys human resources chief TV Mohandas Pai said in an interview says IT business models are changing

Economic growth can only come if there is a constant re-balancing of talent. People need to be productive and efficient to earn the money they are paid because the consumer ultimately pays for the inefficiency. Very often because of good times people get paid much more than they deserve for the value they create. Those who live by the sword should be prepared to die by the sword. If you want very high salaries, great perks then when times go bad or business shifts and you are not adding value you pay the price.

People do have good careers but will not have fast tracked promotions as earlier. The focus will be on higher skill and productivity.

There seems to be a malaise in the India IT industry. There’s talk of hiring and firing. Is this normal or is the industry shifting to a new business model?

This is a function of growth rates. The model is built on a pyramid at a particular angle. The ratio of developers to analyst to managers determines their efficiency and profitability. People get promoted very fast often at the cost of capability and maturity because of the fear of attrition. With growth rates down, in the teens, obviously the model needs to change. Many in the middle in the 10-15 year experience band would be redundant and very high cost. So what you see is an adjustment to lower growth and a rearrangement of the cost structure.
Also much of the so called high value work needing more experienced people has been down valued because of better process and automation. Today a senior developer often does the work of a junior consultant.

Pink slip is a something that many of us might face in future(I have personally faced it when my company got acquired). Kind of skills needed in the industry change with time. A decade ago needs for IT market were very different from the IT market today. Today there is high demand for jobs like data analysis, eCommerce which are high paying jobs (and high pressure too).  Layoffs is now part of every industry , especially one which is down. For example Nokia shut down it’s manufacturing factory in Chennai making 5000 people unemployed. With airlines criss airline staff got affected. In 2008 due to financial crisis people in financial industry were impacted.

 Reactions of Terminated Employees on being fired from movie Up in the Air.

I recently saw the movie Up in the Air  a 2009 movie starring George Clooney as Ryan Bingham based on 2001 novel of the same name, written by Walter Kirn. The story is centered on a corporate downsizer Ryan Bingham and his travels. Ryan makes his living by firing people, he travels to workplaces and informs workers of their dismissals in place of their employers, who fear doing it themselves. When he fires people some of their reactions are

• I can’t afford to be unemployed. I have a house payment. I have children.
•  I just… I guess you leave me dumbfounded. I don’t know where this is coming from. How am I supposed to go back as a man and explain this to my wife that I lost my job?
• On a street level, I’ve heard that losing your job is like a death in the family. But personally, I feel more like the people I worked with were my family and *I* died.
• This is what I get in return for 30 years of service for my company? And they send some yo-yo like you in here to try to tell me that I’m out of a job? They should be telling you *you’re* out of a job.
• You have a lot of gall coming in here and firing your number one producer. And then you’re going to go home tomorrow and make more money than you’ve ever made in your life, and I’m going to go home without a pay check.

Hindi movie Bewakoofiyaan of 2014 featuring Ayushmann Khurrana, Sonam Kapoor and Rishi Kapoor is about  young people of today(shown as spendthrift, credit card-swiping generation) and repercussions of recession and unemployment of laid-off . (The movie was not good but the mainstream movie exploring the losing job concept was good)

Finances and Losing Job

While job security cannot be guaranteed today, a skilled or experienced worker can find another one. However, the interim period can be difficult if one does not plan one’s finances well. Losing  a job takes an emotional toll and you also have your finances to worry about. Some of the financial moves to help you tide over the period

Emergency Funds: Having an emergency fund that can take care of at least three to six months’ expenses can be of enormous help,

Budget and Bills: Make a survival budget to get a sense of how long your savings can keep you afloat. It would help you to tide you over when your finances are squeezed. A monthly budget has two components: fixed expenses and variable expenses some of which are necessary and some which are discretionary . Fixed  expenses include such as groceries, rent or maintenance bills, electricity bills, mobile bills and other utilities that you cannot avoid. While the lifestyle expenses would be weekend movies at multiplexes or restaurant . Look for expenses that can be cut out of your budge. It’s never wise to let bills go unpaid, but if you’re in a money crunch, make sure you know which ones to pay first. Prioritize your bills.

Manage Loans, Credit Card: Most households have debts, such as a home loan, personal loan, and credit card bills. Make sure that you pay your EMIs, especially for the home loan. If you are finding it difficult to pay the EMI, you have to explore the options : requesting your lender to restructure the debt or asking for deferment of loan payment or Switching the loan to another lender who offers lower interest rate. Credit card debt can prove very expensive if ignored, so pay at least the minimum amount due. You can also apply for a balance transfer to another bank’s credit card, which will reduce the minimum due amount.

Family Support: Losing your job is not a reflection on your worth as a person, or even on the quality of your work. At this juncture support of family is important.Talk about issues with your family and friends - don’t bottle things up. People think they can protect their children by not discussing finances around them, but a joint effort can yield great results. You can put it in terms they can understand — like instead of ordering out pizza three times a week, maybe you only do it once.”

Medical Emergencies: It is likely that your employer offered you and your family a medical cover. However, when you lose your job, the health insurance goes as well. This is the reason it is suggested that employees buy an independent cover besides the group cover from the employer.

Many have faced a job loss infact. Many successful people have lost their jobs, only to go on to better things.  But with Changing times one needs to understand that there would be layoffs and  take layoffs in stride, upgrade our skills and if worst comes to worst  be prepared for the worst. Look forward to hear from you How should one prepare for changing times where layoffs are part of picture? How should one manage finances on losing job?