Reports of upcoming massive layoffs at India’s biggest IT companies such as Infosys, Cognizant, and Tech Mahindra is adding to the panic among techies in country’s tech hub.

Industry body Nasscom’s confirmation that hiring will continue to be slow throughout the year has further added fuel to the fire.

According to Nasscom, over 50,000 techies may find themselves without a job in coming months.

“Layoffs in IT and BPO sectors are expected to continue this year with the pace of job creation slowing down,” Nasscom cautioned industry in a statement.

The industry body has indicated that more job cuts will follow as companies are gradually moving towards automation and are looking at hiring skilled staff.

“This time, the middle management is also getting affected because of automation. My estimate is that in next one year, at least one lakh jobs will become irrelevant,” Kris Lakshmikanth, CEO of Headhunters said.

According to estimates, Infosys and Wipro are likely to shed about 2,000 jobs, Tech Mahindra is expected to lay off about 1,500 employees, this year.

Deepak an employee of Tech Mahindra is thankful that he has been spared the guillotine of layoffs. But the sense of security is fleeting.

“I thought of looking for a new job, but after these layoffs I have no way to shift. My team members are also nervous about these reports,” he tells Moneycontrol on condition of last name anonymity.

Bopanna, another Bangalore-based techie working with one of the biggest IT hardware company in the city says we have been getting internal e-mails about layoffs in small tranches.

“People in my team are staying put, preparing for the worse. Although no major layoffs have been announced, people who are on bench or on long leaves are being asked to leave,” he says.

Industry is going through automation

Why this sudden flux in layoffs in the IT industry? Roydon Gonsalves, Director, CXO Practice, Ray & Berndtson HR practices, is of the view that IT industry is in a stage of transformation.

Big players such as Infosys, Wipro, TCS, and Cognizant have been servicing segments that require human intervention.

“They have not been able to keep pace with this change. The transformation to a new skill set should have been a gradual one. But now that automation is a reality, these companies are rushing to hire talent with new skill sets,” he said.

Although the process of layoffs is a routine process, the quantum of it this time is huge, even when we compare the massive layoffs undertaken by TCS last year.

How benching is used a pretext to layoffs

Every year, companies conduct performance based appraisals and about 2 percent of the workforce is sacked.

According to industry sources, IT companies are deliberately evaluating employees to the lowest rating, and putting them on bench to cut workforce. This practice portrays layoffs as a routine process inside companies.

A source in the higher management of Wipro also said that the practice of shedding off benchers and contractors is underway. He did not want to be named because he is not authorized to speak to the media.

One can read between the lines in official company statements on layoffs.

“We conduct regular performance reviews to ensure we have the right employee skill sets necessary to meet client needs and achieve our goals. This process results in changes, including some employees transitioning out of the company,” Cognizant said in an official statement.

Re-skill is the need of the hour

Naresh Krishna, managing an IT project for Ernst & Young says that as an employee, layoffs and hiring freeze is depressing. “But as a manager, I can tell you that hiring people with new skill sets is imperative. There is no other way to go,” he says.

Organizations are gradually doing away with basic coding jobs and other positions in the low-skilled category that is set to become outdated because of automation.

“Employees will have to re-invent themselves with new skill sets to make them useful in an automated work environment. If that doesn’t happen people will lose jobs,” says Srikanth Srinivasan, regional director at Nasscom.

The change in focus of the IT companies towards new technologies is another reason why IT companies are looking at renewing their workforce.

“I am a trained software engineer. But Now I find myself completely at loss because my company wants me to work on AI, BI, or cloud. I will have to go back to the school to acquire these skills,” Mohit Wadhwa, a Bangalore-based techie working with Wipro says.

Mohit is instead contemplating changing his line of profession and jump to smartphone engineering or teaching.

In the recent past, big IT companies have faced competition from emerging technologies such as big data, data analytics and so on. IT firms are now investing heavily on developing capabilities around these emerging technologies. “This will render a lot of mundane jobs irrelevant and create job opportunities for people with a niche skill set," Gonsalves said.

H-1B troubles to complicate matters

But the reasons behind troubles in IT sector are not all domestic. The tightening of H-1B visa regime in the United States has also forced IT giants to create fundamental changes in their hiring strategy. The restrictions have forced the IT companies to maintain a workforce which is highly skilled.

"Indian IT companies are bound to face disruptions by way of higher costs and even some laying off work force back home, because of US visa rules," industry body Assocham said in a report.

The US visa rules have narrowed the scope of IT firms to export talent for projects bagged overseas. The lottery-based system of awarding H1B Visa was dominated by Indian IT companies with over 80 percent approval rate.

Under the new visa rules spearheaded by President Donald Trump, H-1B will be given to the most skilled and highest-paid applicants.

"Nearly 86 per cent of the H-1B visas are issued to Indian IT workers. This figure will narrow down to about 60 percent or less,” Assocham said in a paper. Plus the requirement of paying Indian IT workers in US at par with the American counterparts will further shoot up the cost.

Kris of Headhunters says that IT companies this year have applied 50 percent less H1B visas this year, which reduces their need for workforce. “The deal size from US clients has also gone down,” he said.

Although the techies in Bangalore we spoke to welcome this move of salary at par, the IT companies will have to streamline their costs to safeguard their revenues.

“I went to Germany for a project with Tech Mahindra. The romance of working in a foreign country is overrated if you go on an onsite, because the expenses and allowances are a huge mismatch. If salaries are paid at par, it is good for us,” Deepak says.

Kris Lakshmikanth, CEO of Headhunters also says that the IT companies have no choice but to reduce their workforce here because projects abroad are drying up. “They are unable to place as many workforce for US projects as they did before, which is eating up their revenues.”

“Hiring one person abroad would mean firing 4 here, to offset the cost of employing local talent in US. Even if they send someone from here, the cost of acquiring an employee will go up. That will be balanced here via layoffs,” he adds.