In view of Tata Consultancy Services' (TCS) 'alleged' retrenchment move, trade unions have asked IT service employees -- amounting to 20 lakh people -- to unionise. However, such a move could have far ranging complications, threatening the industry's ability to regulate itself.

Politically affiliated trade unions have approached TCS workers facing retrenchment and have extended their support. 

Tata Consultancy Services
Tata Consultancy Services (TCS) Chief Executive N. Chandrasekaran speaks during a news conference in Mumbai July 18, 2013.Reuters File

IT industry has enjoyed success as a result of its ability to hire and retrench employees, as per business conditions. While recruitment ran into thousands per year, retrenchment was much less. However, the churn was higher as a result of people leaving to join competitors.

Workforce Unionisation

All India Trade Union Congress (AITUC) and Centre of Indian Trade Unions (CITU) has asked software engineers to plan a strategy to resist the alleged workforce cut planned by India's largest software services firm. 

On Saturday, IT&ITES Employees Centre (ITEC) organised a meeting for IT professionals from the industry, who have been rattled by the TCS move, and decided to hold protest demonstrations in Bangalore over the coming weeks. The ITEC fears that the trend of retrenchment might spread to other companies as well. 

CITU's Karnataka general secretary Prasannakumar stressed that the only solution available was to invoke Buddha's mantra – "Sangam Sharanam Gachami." (I take refuge in organising.)

The industry has long resisted moves to unionise the workforce, given India's legacy of companies coming to ruins, a result of antagonism between the two sides – owner/management and workers/trade unions.

AITUC district secretary Satyanand Mukund, also a former TCS employee, argued that the Indian IT industry is labour intensive and there was little sense in calling for labour law exemptions, according to Hindustan Times.

TCS's 'alleged 10% workforce cut'

Last week, reports of TCS downsizing about 25,000 to 30,000 employees -- a tenth of its workforce -- sent shivers among industry insiders and they immediately denounced the move.

A TCS staff member said that the retrenchment of employees started three weeks ago, and so far, 3,500 people across various centres have lost their jobs. The numbers are expected to swell in the coming weeks.

TCS workforce strength stands at 3,13,000 people across all operations. The percentage of people retrenched accounts for slightly more than 1%. The company is on-track to recruit 55,000 people for the year.

The source added that the retrenchment drive started with the banking and finance sector, TCS's largest business segment, and also extended to other areas including insurance.

The world economy continues to remain depressed and banks around the world have been forced to undergo capital stress tests, confirming their ability to withstand conditions in case of a meltdown. 

The need to conserve cash has forced many of the financial institutions to put investments on hold, which has a direct consequence on IT companies who are dependent on the business generated from the international majors.

Eight-year Experience

The retrenchment drive is likely to affect workers with eight years of experience and more given their limited ability to differentiate themselves against younger colleagues, who can be sourced at significantly lesser cost.

TCS has 90,000 people with experience of eight years and more, and the company will allegedly cut down the size to 30,000 to make place for freshers.

The company has insisted that the retrenchment move was not out of the ordinary and explained that it was performance-related, affecting 1%-2% of its workforce.

Legacy Cost

Legacy costs associated with long term employees remain high for every organisation and industry. Over a period of time employees become more expensive as they become more experienced and efficient. Technology and low cost workers are some of the advantages for the company, forcing them to address the issue of employee cost rationalisation.

The IT industry needs flexibility and needs to be able to handle cyclic upturns and downturn. A move to unionise IT workforce could force India to lose its very ability to remain the world's favoured IT manager.

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