Layoff Works, Financial Crisis may affect or not….

Layoffs, A words describe termination or workforce reduction, but this is the insecurity sword looming over the heads of all employees in all sectors in Indian IT industry today.

Layoff hits Every organisation, whether small or big, is reducing its workforce.  whether its Textile Industry, Diamond Industry, every industry Layoff’s there employee.

Recently the Indian job market has been flooded with news TCS laying-off 1300employees,Hexaware puts 350 employees on Virtual bench, Mastek Ltd benched about 425 of its employees etc. Fearing the economic slowdown in the US economy, Indian companies who deal with the US companies or US multinationals in India are cutting down on the number of its employees. Starting from the IT sector, the latest news of layoffs has come from almost all the sectors of the industry. 

Nearly 40 per cent of all Hexaware’s employees will be unaffected by this pay cut.

Mastek Ltd benched about 425 of its employees, giving them the option of either leaving immediately with compensation or staying for not more than one year, on a monthly allowance.

 
IT Sector
IT sector is facing and moving further towards a recession. Every IT organisation, whether small or big, is reducing its workforce.

Layoff works, In Indian IT Sector / Other Sector whether Financial crisis may affect or not.

The average salaries offered and the average annual hike in the salaries / compensation in the IT sector have also seen a downfall.

Justifying the lay-offs, most of the organisations argue that the employees were asked to leave (not fired) & really a good word to leave but not to fired that is “Virtual Bench”… this is because of their unsatisfactory performance. And the organisations are now not looking to re-fill the positions. The average salaries being offered in the industry have also come down in the sector. Similarly, all the organisations are undertaking the cut in the salaries of the employees.

There is different options other than layoff for employess i.e. Virtual Bench, Reduce in Hours of Work for employee, Cut in there salaries, Reducing Working Days, Reduce in Bonuse and compensation.

A good word to leave but not to fired that is “Virtual Bench”, The average salaries offered and the average annual hike in the salaries / compensation in the IT sector have also seen a downfall.

Siemens India cuts working days :  planned a temporary cut in the number of days its switchgear factories will work to avoid inventory build-ups amid the deepening economic slowdown.

some factories in the energy sector” will reduce their working weeks by one day, The company, which employs a total of 131,000 people in Germany, said 7,400 employees would be on shorter hours until April. Previously, only 4,600 workers had been affected.

some of the recent headings from Layoff’s

Hexaware to cut 2-10% salary.

Infosys to Cut Bonuses, Compensation Packages.

Baltimore companies look to cut costs, avoid layoffs.

Suggest !! How to save a Common Man, as people save its not crisis but OPPURTUNITY.

Securitization And The Subprime Crisis

The subprime crisis came about in large part because of financial instruments such as securitization where banks would pool their various loans into sellable assets, thus off-loading risky loans onto others. (For banks, millions can be made in money-earning loans, but they are tied up for decades. So they were turned into securities. The security buyer gets regular payments from all those mortgages; the banker off loads the risk. Securitization was seen as perhaps the greatest financial innovation in the 20th century.)

Starting in Wall Street, others followed quickly. With soaring profits, all wanted in, even if it went beyond their area of expertise. For example,

• Banks borrowed even more money to lend out so they could create more securitization. Some banks didn’t need to rely on savers as much then, as long as they could borrow from other banks and sell those loans on as securities; bad loans would be the problem of whoever bought the securities.
• Some investment banks like Lehman Brothers got into mortgages, buying them in order to securitize them and then sell them on.
• Some banks loaned even more to have an excuse to securitize those loans.
• Running out of who to loan to, banks turned to the poor; the subprime, the riskier loans. Rising house prices led lenders to think it wasn’t too risky; bad loans meant repossessing high-valued property. Subprime and “self-certified” loans (sometimes dubbed “liar’s loans”) became popular, especially in the US.
• Some banks evens started to buy securities from others.
• Collateralized Debt Obligations, or CDOs, (even more complex forms of securitization) spread the risk but were very complicated and often hid the bad loans. While things were good, no-one wanted bad news. 

High street banks got into a form of investment banking, buying, selling and trading risk. Investment banks, not content with buying, selling and trading risk, got into home loans, mortgages, etc without the right controls and management.

Many banks were taking on huge risks increasing their exposure to problems. Perhaps it was ironic, that a financial instrument to reduce risk and help lend more—securities—would backfire so much.

When people did eventually start to see problems, confidence fell quickly. Lending slowed, in some cases ceased for a while and even now, there is a crisis of confidence. Some investment banks were sitting on the riskiest loans that other investors did not want. Assets were plummeting in value so lenders wanted to take their money back. But some investment banks had little in deposits; no secure retail funding, so some collapsed quickly and dramatically.

The problem was so large, banks even with large capital reserves ran out, so they had to turn to governments for bail out. New capital was injected into banks to, in effect, allowthem to lose more money without going bust. That still wasn’t enough and confidence was not restored. (Some think it may take years for confidence to return.)

Shrinking banks suck money out of the economy as they try to build their capital and are nervous about loaning. Meanwhile businesses and individuals that rely on credit find it harder to get. A spiral of problems result.

Hence, banks had somehow taken what seemed to be a magic bullet of securitization and fired it on themselves.