SACKING EMPLOYEES DURING THE CORONAVIRUS PANDEMIC: WILL IT HELP THE BUSINESSES RUN BETTER?
While this pandemic has been troublesome for almost everyone around the globe, we cannot deny that it has been a total nightmare for the less fortunate ones. People managed to figure out ways to earn their livelihood during rough times by working from home and some were bound to attend their jobs no matter what the consequences are. Some managed to set their foot and some just scrawled out. However, there is no denying that this pandemic has worst-hit most of the businesses in the country and around the world. In lieu of this, many companies decided to lay-off employees in the middle of a worldwide crisis. Apparently, it is not very hard to understand why companies have taken this action, that too in a jiffy.
In this article, we will discuss which companies laid off their employees, what are the reasons, and what could be its consequences?
Companies that sacked employees during coronavirus pandemic:
In India, so far there are many such companies that laid-off employees in the midst of a crisis considering that there’s a big halt in production due to the lockdown. Here’s a list of some of those companies:
Ø One of the biggest lay-offs happened in Ola with about 1,400 employees formally asked to leave the company without serving any notice period.
Ø One of the major food delivery giants Swiggy announced that it will lay off 1,100 employees, which is nearly 14% of its total workforce.
Ø Another food delivery giant Zomato, which recently subsumed Uber’s food delivery business also stacked 13% of its total workforce and there shall be a salary cut up to 50% for at least 6 months.
Ø Uber is also on the list as it has decided to sack 500 to 700 employees from its India office. It decided to sack 6,500 employees globally.
Ø Twitter-backed ShareChat also laid off 101 based in India.
Ø US-based commercial Real estate company WeWork, laid off 20% of its workforce that is based in India.
Ø Indian news website, The Quint, sent its 45 employees on indefinite leave without any pay. This typically signals at lay-off.
Ø News Nation Network laid off its entire English digital team of 15 members.
The above list is just an example and according to a Survey, over 130 million people in India lost their jobs in April. About 76% of these were small traders and daily wage earners, i.e. about 90 million jobs. Not only employees lost their jobs but there are 18 million businesses that closed during the period of March-April 2020.
If you look at the data state-wise, Tamil Nadu got the worst hit, with the highest employment rate and lowest labor participation. There are several other states such as Jharkhand, Bihar, Karnataka, etc. which suffered high job losses due to the pandemic. Therefore, the large scale loss of employment among businesses is a clear indication that loss is not just limited to jobs but it has also reached the enterprises and beyond. Let’s take a look at sector-wise job losses:
1. Travel and tourism
2. Aviation
3. Automobile
4. Entertainment
5. Food
While the above-mentioned sectors faced the worst lay-offs of all times, sectors like healthcare, pharmaceuticals, FMCG, e-commerce industries managed to keep their work going and are actually doing better.
Reasons for stacking employees:
The reason is obvious, lockdown caused due to the coronavirus pandemic. Almost all the companies in India were forced to stop their production due to which there was a steep decline in the revenue for the quarter April 20- June 20. There’s always this question in mind — Why big companies are laying off employees despite huge profits in previous quarters?
Well, the answer to this is liquidity. There are many big companies which have huge profits in their balance sheet, which is a clear sign that company is doing well. However, employees’ salary is something that is needed to be paid in cash. This simply means that in order to meet salary expenses, the company shall have sufficient cash. We can argue about the possibility of why not? But the fact that the company might have the cash to manage salary for a month or two, after that, it needs its operating cycle to work. Therefore, the only option they have is either to lay-off employees to cut down their cost or to reduce employees’ salaries, to which most of the employees will not agree.
What are the consequences?
Well, job lay-offs are not just financially challenging but they put mental and physical strain on the individual as well. While the companies could be able to their costs in the short-run, it could be a huge turnaround for the economy and the individual.
Considering that this whole situation has affected the migrants in a major way as they struggled to get back home. Now, most of the migrants moved back to their towns so there will be more people looking for work and very few opportunities. Things will take time to cool down and there are chances that migrants will not return for a certain period of time which will obviously be a problem for companies that employ low-cost labor.
If unemployment continues for a longer-term than expected, it can deteriorate the skills of employees and therefore, change the way they plan their future. Also, in the absence of any income in the family, there are chances that they may end up sacrificing a lot of things such as education, items of luxuries, etc. This will reduce the demand for various products in the economy and thus reducing the overall production. Unemployment can actually kill an economy to the worst extent possible. It can also increase the crime rate in the country as money is the only factor that causes outrage among individuals.
Unemployment in an economy is a dangerous state as it would mean higher payments from the government for the welfare of those unemployed in form of food benefits, Medicaid, and other unemployment benefits, which would be a huge cost for the government. Also, due to less income in hand, the government will collect lesser taxes from the individuals. Now, look at both the situations parallelly, this would simply mean a huge fiscal deficit gap. Consequently, all of this will sum up to a lower GDP for the economy.
Whereas, not just economy and employees, businesses will also suffer from lay-off as there are many tax relaxations on employee costs which cannot be avoided in the absence of those costs.
To conclude, the repercussions of unemployment are far beyond just economic, it is long-lasting. It is very important for the workers to feel confident in their future to invest so that they could improve their skills and the economy needs to grow as a whole. Not just social unrest and discontentment, high unemployment can have a continuing negative impact on businesses and the economic health of the country. These lay-offs can give temporary breathing to the businesses but will have an ever-lasting impact on the economy.
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