COVID-19 Lockdown: Are Financially Comfortable Companies Using Retrenchments to Augment Profits?

The retrenchments in the IT sector have gathered pace as the lockdown continues. The retrenchments are being made in spite of good performance by the companies over the last couple of years. The companies seem to have found the SARS-CoV-2 as the escape route to let go of their employees. With most of the companies extending their services without much interruption even during the lockdown, the retrenchment can only be termed as a desperate step to increase their profits.

A case study on eNoah iSolution has proved that, in spite of a strong balance sheet, the company is forcing its employees to resign. A few other companies including Contagious Online media, which runs the TVF Play, livspace.com, Eureka outsourcing Solutions Pvt Ltd and Valeo, have forced their employees to resign.

TAKING ADVANTAGE OF LOCKDOWN

The employees of the eNoah iSolutions and Mectus Systems India Private Limited (MSIPL) were asked to resign during the first phase of the lockdown. The ramp down of projects was cited by eNoah iSolution as the reason for the retrenchment in the offices in Chennai and Coimbatore. Sources from the company referred to the ramp down from a US client from the real estate industry. The stoppage of funds was cited as the reason for the retrenchment of the employees.

Alagunambi Welkin, general secretary of the Union of IT and ITES Employees (UNITE), said, “The company asked the employees to resign instead of terminating them. They scared the employees of getting blacklisted if they are terminated from their service. It was projected as a humanitarian option, but the fact remains that the company has taken advantage of the lockdown period, violating the labour laws.” 

VIOLATION OF LAW OF THE LAND

The UNITE has accused the companies of violating the law of the land by forcing the employees to resign. The Industrial Disputes Act, 1947 mandates permission from the government, ‘last in first out’ policy and a notice to employees as the prerequisites. 

“When we contacted the labour welfare offices, we were told that the offices are busy in attending to the issues of migrant labourers and taking up such disputes may take more time,” Welkin added. 

While the official machinery is occupied with the migrant workers’ issue, the companies seem to be exploiting this situation. The claims of the organisations regarding lack of income have also been proved to be false based on their recent balance sheets. 

‘STRONG FINANCIAL BACKUP’

An analysis was arrived at, based on the consolidated financial statement of eNoah iSolutions for 2016-17 and 2017-18 financial years. The statement included the revenues from the four of the company’s subsidiaries in other countries as well.

The revenue of the organisation stood at Rs 49,26,06,905 and Rs 76,99,73,124 for the 2016-17 and 2017-18 financial years respectively.

“Considering a growth rate of 55%, the revenue in the last financial year would be somewhere around Rs 117.8 crores. The surplus amount in bank accounts, as per the statement for 2017-18 was more than Rs 24 crore. With such a strong financial backup, the reason for forcing the employees can be nothing except boosting their profits,” Welkin alleged.

Many other companies in Tamil Nadu have resorted to retrenching employees even as the Department of Labour Welfare has advised not to.

‘LABOUR DEPARTMENT APPROACHED’

Ten TVF Play employees were asked on April 10 to resign by April 20 and were relieved by May 20. The remaining 15 employees of the organisation based in Chennai were also asked to resign on May 22. 

The company has not paid any compensation to the retrenched workers, apart from the one-month salary for the notice period. The company’s valuation increased to $80 million after additional funds from Tiger Global Management in May 2019.  The reason for retrenchments has not been revealed to the employees.

The UNITE has submitted petitions to the Labour Commissioner on the ongoing retrenchments in the IT sector. The organisation has submitted a petition pertaining to companies namely livspace.com, Eureka Outsourcing Solutions Pvt Ltd and Valeo. 

“We have submitted the petition along with the details of retrenchments and wage cuts. But the Union government is not worried about the plight of the people. A strong union of the IT employees and a united fight alone can ensure the restoration of the rights of the employees,” Welkin said. 

Also read: COVID-19 and Closed Tea Gardens: Issues of Livelihoods in India