The Karnataka government’s recent approval to allow the formation of the State’s first IT union could hamper job creation but could force the industry to look at alternatives to layoffs.

On November 8, the Labour Commission gave its nod for the formation of Karnataka State IT Employees Union (KITU), in a State that has granted exemption to companies from labour laws under the Industrial Employment (Standing Orders) Act, 1946. The Karnataka government in October 2013 exempted IT companies from labour laws for another five years till 2018.

This development has angered many in the industry. “It is a very wrong move, will have a bad impact on the industry and goes back on the promise that the government made earlier,” TV Mohandas Pai, former CFO of Infosys, told BusinessLine . Another CEO of a mid-size US company pointed out that this is totally illogical. "Companies will go slow on hiring if somebody is constantly watching them."

Layoff fear

The move to form unions have been doing the rounds regularly this year when news of layoffs in the $155-billion IT industry started doing the rounds as companies resorted to layoffs as a result of automation and unemployability of techies. Many employees referred to these layoffs as unfair termination — meaning that they were not given a fair opportunities to prove their work. This has enraged a section of laidoff employees and associations such as KITU and Federation of IT Employees (FITE) have come into fore.

While there are no official numbers on layoffs, FITE estimates that 60,000 workers have lost their jobs in the past few months. According to a study by McKinsey, around two lakh techies are expected to lose their jobs every year.

Industry watchers believe that this move by the government of encouraging unions will not solve the problem of job loss. “In an industry where 15 per cent average annual attrition exists, why is this needed. In fact, it will hurt job creation as companies will think twice about the inspector overhang,” said Pai.

Vineeth Vakil, General Secretary of KITU, pointed out that it is a fundamental right of an individual to form or be a part of the union and reiterated that they were not against development. “It serves as backbone of collective bargaining, strives to secure for a fair, reasonable and safe work conditions,” he said. Currently, KITU has around 250 members and is planning to enrol 3,000 members in the next three months.

Krishnakumar Natarajan, Executive Chairman, Mindtree said that this will have no impact on the industry.

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