IT companies shut the door on 60,000 contract workers

MUMBAI/ BANGALORE: Thousands of jobs are vanishing in top-line information technology companies as they try to cope with the economic downturn. According to workers in the IT sector, nearly 60,000 contract or ‘vendor-supplied’ employees have been hit in the current round of trimmings. These figures, however, do not show up in the records of the IT firms.

“Many of us had to return to our staffing agencies,” said a worker with IBM’s learning content and development department in Bangalore, requesting anonymity. Several IT professionals DNA spoke to in Bangalore said they knew of colleagues or friends who had been “sent back” as IT companies try to scale down to the reduced demand for their services across the world.

“There have not been any cuts in my work group,” said a Microsoft employee from Bangalore, “but I have friends who know people who been told to go, from Google, HP, Dell and SAP.” Another employee with Accenture, which employs an estimated 40,000 people in India, said the company started cutting down on ‘contract workers’ from its software development division about six months ago.

While Google announced it will be trimming its ‘contract’ work force, Microsoft told DNA it is keeping its options open. “As of date there has been no such move,” a spokesman said. “We will determine actions as we go along.”

None of the other companies — IBM, Sun, HP, SAP, or Accenture — refused to confirm or deny if they were offloading contract employees.

But according to employees, most of the shrinkage in contract employees is happening in these multinational firms, with few or no layoffs of ‘vendor employees’ in Indian firms.

Dell said it was letting go of non-Dell employees so that staff on the rolls did not have to be retrenched. “Dell is taking steps to eliminate its non-Dell workers (contractors),” the company said in a statement. “[This is] to limit the number of staff reductions required to contain expenses in a particularly challenging economic environment.”

Sanjay Kelapure, director of recruitment firm Corporate Pride Consultant, said most of the employee reduction is going unreported because of the nature of the IT industry in India. “Many companies are simply refusing to renew contracts with ‘outsourced’ staffing firms,” he said. “That means that though someone is laid off, it is not from your rolls.”

The IT industry, especially local arms of international giants such as IBM, Google, HP, SAP, and Accenture, have two types of employees. First are the direct employees, comprising 50 to 90 per cent of the work force. These are supplemented by a ‘vendor-supplied’ work force. “Most of these contracts are for six months to one year, and are then rolled over,” said Kris Lakshmikanth, CEO of Bangalore-based recruitment and outsourced staffing firm Head Hunters India. Kris says around 60,000 ‘outsourced’ staff are employed by the top 25 IT companies in India. While they account for 15% of the staff at most multinational IT companies, their number is negligible in Indian companies.

The anecdotal evidence from employees is backed by numbers at the staffing firms. “Non-renewal and premature cancellation of contracts have increased in the last three months,” said AR Rajesh, vice-president in charge of temporary staffing at Teamlease, which has around 85,000 temporary staff on its rolls, mostly for IT and BPO industries.
“For IT, the usual renewal rate is 70-80%. That figure is down by 15 to 20 percentage points,” he said. “Premature cancellation of contracts, which used to happen in 1-3% of cases, now happens in 10% of cases in IT. In addition, the conversion rate of temporary staff into permanent staff, which used to happen in about 40% of cases, has almost dried up.”

But laid-off employee have it better than fresh graduates. “If you have worked in a big company, even as a temp, it adds to your CV. The chances of finding another job soon, even if in a smaller company, are high,” said Sujit Radhakrishnan, who has found a new job after being laid off a month ago.