Layoffs are back in the headlines, but this time they look different. Across India’s IT sector, companies are making tough choices as they balance slowing demand, rising competition and the rapid shift to AI-driven solutions. The recent decisions by TCS, Microsoft, Intel to let go of their employees have reignited the debate around why layoffs happen, what goes on behind the scenes and whether they are truly inevitable.
Why Do Layoffs Happen?
Layoffs can stem from a variety of factors—some external, others internal. Common reasons include:
- Economic slowdowns: When markets contract, companies cut costs to preserve profitability.
- Technological disruption: As AI and automation replace manual tasks, some roles become obsolete.
- Strategic shifts: Mergers, acquisitions, or a pivot in company focus can result in redundant positions.
- Skill mismatches: Even in growing companies, employees may be let go if their skills no longer align with business needs.
- Operational efficiency: Companies may consolidate teams, automate processes, or restructure to become more agile.
Contrary to popular belief, layoffs aren’t always sudden. Many are the result of months—sometimes years—of workforce imbalance or delayed reskilling efforts. For instance, Tata Consultancy Services (TCS) recently laid off around 12,000 employees, roughly 2% of its global staff. While this made headlines, the decision wasn’t based on short-term losses. The company’s leadership openly cited the need to correct skill mismatches, reduce underutilized roles, and align more closely with client demands for AI and digital services. In essence, the layoff reflected an attempt to future-proof operations—not just cut costs.
How Do Layoffs Unfold?
Inside companies, layoffs are rarely decided overnight. They’re typically the outcome of multiple layers of internal review—financial forecasting, performance evaluations, client pipeline shifts, and team utilization metrics.
Companies may:
- Reduce bench strength (employees not currently assigned to projects)
- Consolidate overlapping teams
- Phase out roles tied to outdated tech stacks
- Prioritize roles with higher automation risk
This process, while designed to protect long-term business viability, can have major consequences for employee trust, morale, and employer branding.
At the same time, not all organizations are taking the same route. Infosys, for example, chose to avoid layoffs entirely. Instead, the company committed to hiring 20,000 fresh graduates and reskilling over 275,000 employees in areas like AI and digital transformation. By focusing on internal mobility and long-term talent development, Infosys is attempting to stay competitive without disrupting its workforce.
A Sector-Wide Trend with Human Cost
Globally, the tech industry has seen over 100,000 jobs cut in 2025, with more than 62,000 layoffs in the first half of the year. Companies like Intel, Microsoft, Meta, Google, and Amazon are leading these waves of restructuring as they respond to market pressure and accelerate automation efforts.
Closer to home, attrition in India’s IT sector is also on the rise. Infosys reported voluntary attrition of 14.1% in Q4 FY25, up from 12.6% a year earlier, while TCS’s attrition rate reached 13.3% in the same period. These shifts signal deeper churn within the industry—where employees are both leaving and being let go at increasing rates.
Rethinking the Way Forward
Layoffs may offer short-term financial relief, but they often come at a long-term cost—eroded culture, disrupted teams, and the loss of hard-earned trust. Rehiring, retraining, and rebuilding morale can quickly outweigh the initial savings.
In a fast-changing world, workforce restructuring is sometimes necessary—but how it’s done matters just as much as why. Companies looking to future-proof responsibly must move beyond reactive decisions and embrace more sustainable strategies:
- Investing in reskilling and internal mobility
- Creating early-warning systems for role obsolescence
- Maintaining transparent communication during transitions
- Designing agile workforce structures that can evolve with demand
On the employee side, preparation is key. Recognizing signals like hiring freezes, shifting project scopes, or increased automation can offer valuable time to upskill—especially in areas like AI, data, and digital collaboration.
Ultimately, layoffs are not just responses to crises—they’re reflections of broader transformation. Companies like TCS highlight the risks of delayed realignment, while Infosys exemplifies a more proactive, people-first path.
